There was no recession in H1 of the year, the two consecutive quarterly GDP declines notwithstanding, but recession in the coming year looks increasingly tough to avoid. We need some luck on the pandemic and Russian invasion to get inflation down, and deft policy from the Fed.
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Mark Zandi
@Markzandi
Chief Economist . Host of Inside Economics podcast bit.ly/3nTDcog. Co-founder of Economy.com. Views expressed here are my own.
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But there is much to be nervous about in the report. Consumers continue to add to growth, but less so. High inflation is cutting into their purchasing power. Business investment is adding to growth, but less so. Higher rates and weaker stocks raise the bar for viable investments.
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The message in today’s GDP report is the economy is bending, but not breaking. At least not yet. The 2nd quarter decline was mostly due to weaker inventory accumulation. That’s a one-time hit to GDP. Inventories, particularly for vehicles, are low and won’t be a future drag.
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Now news that Senator Manchin is on board with a fiscal package that includes funds for climate, energy and healthcare, more than paid for by tax increases on corporations and the wealthy. This will not impact the economy near-term but will have a meaningful long-run benefit.
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Good day for the economy. The Fed stuck to script on rates, but Chair Powell suggested that future rate hikes depend on inflation and jobs. Inflation and job gains will moderate significantly beginning in July. We are closer to the end than the beginning of the rate increases.
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Housing once again could take center stage in the next recession. Sales are sinking and real estate company layoffs have begun. Let’s hope they don’t plunge.
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Another rate hike is expected today, but could it slow the economy too much? Chief Economist at breaks it down on the #FOXNewsRundown #podcast.
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The Conference Board’s consumer confidence index fell from 98.4 to 95.7 in July. Falling 13 points over the latest 3 month period. It is edging closer to the 20 point mark, consistent with recession in 3-6 months. This is an indicator to watch as the Fed aggressively raise rates.
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On the latest #InsideEconomics: U.S. consumers are serving as the firewall between continued economic growth and a recession.
With confidence seemingly tied to the stock market, are we in for a strong pullback from high income consumers? apple.co/3PEmiF9
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Kicking off the "State of the States" fiscal outlook for 2023.
"The economy is struggling, growth is slowing ... But I don't think we're in a recession." He added that risk of a recession has increased.
#LiveatUrban
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The Fed should take heed. With growth slowing (see UI claims), inflation set to moderate (see gas prices), and inflation expectations back in (see 1yr, 5yr forwards), the Fed should loudly hint that after this week’s 75 bps hike, future hikes need not be nearly as aggressive.
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While we are not in recession, recession risks are uncomfortably high. Our model of recession probabilities in the coming year put the probability at 68%. This has recently jumped higher given the inversion of the 10-yr, 2-yr Treasury yield curve and darkening sentiment.
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The arbiter of recessions is the NBER. This group defines recession as a significant decline in economic activity that is spread across the economy and that lasts more than a few months. That’s not H1 of this year when layoffs were near record lows and job gains rip-roaring.
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Real GDP in the second quarter is set to decline - down around 1% annualized. This comes after a first quarter decline of 1.6%. Two consecutive quarters of real GDP declines have historically done a good job of pegging recessions. Not so this time – we are not in recession.
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American consumers are the firewall between continued economic growth and recession. This week we consider whether the firewall will hold.
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UPDATE: Alan Blinder will join us on Friday, July 29th.
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There is no one better than Alan Blinder to assess the response of the Fed and lawmakers to the economic challenges we face, from soaring inflation to the threat of recession. Join us this Friday for the discussion.
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There is no one better than Alan Blinder to assess the response of the Fed and lawmakers to the economic challenges we face, from soaring inflation to the threat of recession. Join us this Friday for the discussion.
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"Demand is weakening very rapidly, and I do think housing is going into a deep freeze." reacts to mortgage demand and home sales falling, as buyers confront higher rates in an already supply-constrained market.
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We like bold predictions on Inside Economics. Save the date .
Listen to the full podcast episode: apple.co/3B8NveH
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Has the stock market finally bottomed? of thinks that may be the case. And he wrote about it for in this opinion piece.
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Co-authored with Michael Stegman, nonresident fellow at the and Jeb Mason, partner at , a bipartisan public policy consultancy
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Policymakers face a daunting challenge in lifting homeownership in the face of rising affordability challenges and demographic trends. Lease-to-purchase arrangements are one such option offering significant potential.
Read the full analysis here: bit.ly/3B0URB3
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. calculates it takes 5 to 6 quarters for changes in market rents to translate into the housing CPI, which means we are likely to see rising rents in the CPI for quite some time.
Listen here: apple.co/3OkHQFh
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A worry is that the currently high inflation causes inflation expectations to rise. That looked to be happening. But the Fed went on high alert, and expectations have come in. Lots could still go wrong, but odds are we will feel better with the July and subsequent CPI reports.
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To be sure, the pandemic could re-intensify, and Russia’s invasion could roil oil and ag markets further, but it is more likely they won’t. If so, at the very least energy, food and vehicle prices go flat and inflation moderates back to the Fed’s 2.5% CPI target (9% - 5% - 1.5%).
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Stressed supply chains account for another nearly 1.5 ppt of the inflation. The poster child for this is vehicle prices, which soared when the Delta wave of the virus hit and hammered global chip and thus vehicle production. But the pandemic is receding and supply chains easing.
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But while upsetting, I took solace that energy and food accounted for fully 5 percentage points of the inflation. And energy prices have fallen a lot since June and appear set to fall even more as the fallout of Russia’s invasion on oil, natural gas, and ag markets fade.
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June CPI was undeniably bad. With inflation up 9%+ from a year ago, the typical household must shell out almost $500 more a month to buy the same things they bought a year ago. That’s $6k more a year, which is a big deal for a household making about $60k per year.
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I had a great conversation with Mike Regan & on Bloomberg's What Goes Up podcast. We discussed the latest CPI report and where the economy is headed in the coming months.
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Recession could be a self-fulfilling prophecy for the U.S., Moody’s economist Mark Zandi warns: ‘When sentiment is so fragile, it’s not going to take a whole lot to push us in’
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Moody’s Mark Zandi says the US can still avoid a recession, but warns that it might talk itself into one anyway
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OUT NOW: A dissecting of the latest CPI report on this week's Inside Economics podcast.
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Lawmakers may have their reasons for not voting for the legislation, but that it would further fan inflation shouldn’t be one of them. Lawmakers should do no harm when it comes to inflation, but that doesn’t mean they should do nothing to address our other economic problems.
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That’s because the legislation, which would address climate change, maintain health insurance, and lower drug prices, is more than paid for. That is, the higher taxes on large corporations and the rich, more than pay for these benefits. The federal debt load will fall.
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Inflation is our #1 problem. All economic policy decisions by the Fed and lawmakers should thus be assessed through the prism of what it means for inflation. The reconciliation legislation being considered by the D Senate will not impact inflation. Not evenly remotely.
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There's a massive housing shortage across the U.S. Here's how bad it is where you live.
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