Economists predict that the United States will likely enter a recession by the end of this year, with high inflation extending well into 2024, according to a recent semiannual survey.
The semiannual survey was administered between March 2 and March 10.
“More than half of NABE Policy Survey panelists expect a recession at some point in 2023,” said NABE President Julia Coronado, who is the president and founder of Macro Policy Perspectives LLC.
“However, only 5 percent believe the U.S. is currently in a recession, far fewer than the 19 percent who held this view in the August Policy Survey,” Coronado said.
More than two-thirds of respondents see inflation remaining above four percent at the end of this year.
“Panelists generally agree on the outlook for inflation and the consequences of rate hikes from the Federal Reserve,” said NABE Policy Survey Chair Mervin Jebaraj from the University of Arkansas.
Economists Skeptical of Fed Inflation Policy
Views have not really changed since the August 2022 NABE Policy Survey.The majority of panelists, or 80 percent, expect the target range to be between 3.75 and 4.5 percent or lower by year-end 2025.
After hitting 9.1 percent last June, monthly price gains have slowed to an annual level of 6 percent in February, which is still above the Fed’s target rate of two percent inflation.
Sixty-nine percent of panelists say they are “not very confident” or “not at all confident” that the Fed will be able to bring inflation down to its 2 percent goal within the next two years without inducing a recession.
Only 30 percent of the economists feel confident, somewhat confident, or are very confident that the central bank will achieve its goal of a soft landing in its attempt to hit its inflation target.
This is a drop of 27 percent from August of last year.
A little more than half of the respondents, or 53 percent, believe that current fiscal policy is too stimulative—a slight increase from the 51 percent last August.
Forty-one percent said that current fiscal policy is “about right,” down from 44 percent, while 5 percent believe that current fiscal policy is too restrictive.
More than 70 percent of panelists believe that consumer price index (CPI) growth will remain above 4 percent through the end of 2023.
Twenty-six percent of respondents indicate CPI inflation is “very likely” to stay above 4 percent through 2023, while 45 percent predict that is “likely.”
Debt Ceiling Remains a Concern
The Biden administration and Congress are still in the middle of negotiations on how to raise the U.S. debt ceiling.Half of the respondents said they thought the likelihood of the U.S. defaulting on its debt payments in 2023 stands at 10 percent or higher, while half say the probability is at 10 percent or less.
Forty-seven percent of respondents anticipate that a combination of spending cuts and more tax revenue will end the debt crisis this year, while 21 percent believe that Congress will agree to a clean debt ceiling increase.
Ten percent of economists surveyed predict significant spending cuts in line with proposals from House Republicans as the most likely path to raise the debt ceiling.
US-China Trade Take a Dive
Increasingly tense relations between Washington and Beijing were another subject addressed by the panel, particularly regarding trade.About 74 percent of respondents believe that tightening controls on American exports of sensitive high-technology goods to China are worth pursuing when it comes to American-Chinese trade relations.
Thirty-five percent said the United States should maintain existing tariffs on imports of Chinese goods and 27 percent are in favor of restrictions on U.S. investments in China.
Finally, only 29 percent of those surveyed support reducing or eliminating existing tariffs on imports from China.
