The latest Bloomberg Economics models predicted the possibility of Economic recession in the United States In 12 months, Bloomberg experts Anna Wong and Elisa Winger see a higher recession probability on all time frames, for the next year ending October 2023, bringing the probability of deflation to 100%, up from 65% for the same period in the previous update.
A recession in the US is sure to be a blow to President Joe Biden’s economic message ahead of the midterm elections in November.
The outlook will be unwelcome news for Biden, who has repeatedly said the US will avoid a recession and any contraction would be “very slight”, as he seeks to reassure Americans that the economy is there under his administration.
But tightening financial conditions, persistent inflation, and expectations that a hawkish Federal Reserve will push ahead with interest rate hikes are increasing the risks of deflation.
The model was more confident of a recession than other forecasts. A separate Bloomberg survey of 42 economists forecast a 60% chance of a recession over the next 12 months, up from 50% the previous month.
The forecast provides a sharp contrast to Biden’s optimistic tone. The president focused on strong job growth during his campaign to help Democrats retain both House and Senate majorities in elections 3 weeks from now.
But inflation, which was close to a four-decade high, has weighed on Democrats’ prospects in the election as polls suggest the economy is the single most important issue for voters.
The Bloomberg Economics model uses 13 macroeconomic and financial indicators to predict the chance of a downturn over a one-month to two-year horizon.
While the chance of a recession in 12 months has reached 100% according to the model, the odds of a recession sooner also increase, as the model predicts the probability of a recession in 11 months at 73%, up from 30%, and raises the probability of 10 months to 25% of 0%.
Bloomberg Economics found that the deterioration in expectations was driven by a widespread deterioration in the economic and financial indicators used as inputs to the model.
