The chief executive of Bank of America (BofA) is expecting a recession to hit the United States this year, with GDP growth projected to fall for three consecutive quarters.
“And then the wage growth is slowing in tipping over, so the size of inflation are tipping down, but they’re still there, but that translates into good—relatively good activity. So we see it as a slight recession and we'll see what happens.”
“We don’t see activity on the consumer side slowing at a pace that would indicate that [recession], but we see commercial customers are being more careful,” he added.
The Federal Reserve had approved nine consecutive interest-rate hikes, which pushed benchmark federal funds rate from 0.25 percent a year back to a range of 4.75–5.0 percent.
Recession Probability
Nonprofit think-tank The Conference Board sees the probability of a U.S. recession as “elevated.” The organization’s probability model predicts a 99 percent likelihood of a recession in the country over the next 12 months, according to a post on April 12.“This is consistent with our view that economic weakness will intensify and spread more widely throughout the U.S. economy over the coming months, leading to a recession starting in mid-2023,” it said, while predicting GDP growth to contract for three consecutive quarters beginning second quarter 2023.
“Despite better-than-expected consumer spending recently, the Federal Reserve’s interest rate hikes and tightening monetary policy will lead to a recession in 2023.”
The U.S. economy registered positive economic growth in the last two quarters of 2022 following negative growth in the first two quarters. However, fourth-quarter growth was slower than thrid-quarter growth.
Corporate Default, Fed Admitting Recession
Experts are foreseeing corporate defaults to rise in the United States. In the Credit Outlook survey conducted by the International Association of Credit Portfolio Managers (IACPM), 86 percent of respondents stated that defaults will rise over the next 12 months.Among respondents, 84 percent foresee a recession to hit the country in 2023, with sectors like health care, defense manufacturers, transportation firms like trucking companies, and medium-sized tech firms being more vulnerable to current market conditions.
“They didn’t use the word ‘recession’ then,” he said. “Well, they’re using the word ‘recession’ now. That kind of ties everything together here.”