This latest survey of 53 NABE members was conducted May 2-10 and forecasts worsening developments since the last was taken in February of this year.
“NABE Outlook Survey panelists continue to ratchet up their expectations for inflation rates in both 2022 and 2023,” said NABE President David Altig, executive vice president and director of research for the Federal Reserve Bank of Atlanta.
“While the panel sees inflation peaking in 2022, projections for the core personal consumption price index have been revised upward by a full percentage point this year.”
Survey Chair Yelena Shulyatyeva, senior U.S. economist at Bloomberg said: “Seventy-seven percent of the panelists indicate the risks to U.S. economic growth are tilted to the downside this year, with monetary policy missteps representing the greatest downside risk.
“More than half of respondents estimate the odds of a recession within the next 12 months are greater than 25 percent.”
Inflation adjusted gross domestic product has accelerated upward from 2021 and is now forecast to increase by 1.8 percent in the final three months of the year, lower than the 2.9 percent estimate from the February survey.
Panelists also lowered their expectations for year-over-year growth in the fourth quarter of 2023 to 2.1 percent, down from 2.3 percent in the February survey.
The most significant downward revisions for both years are in consumer spending and net exports.
Economists however, raised expectations for both the Consumer Price Index (PCI) and the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred gauge to calculate its policies.
The PCI is projected to rise 5.6 percent year-over-year in the fourth quarter, two percentage points higher than the forecast in the group’s previous survey.
The median forecast for the PCE price index is expected to climb 4.8 percent, which is double the Fed’s target and up from 3.2 percent in the last survey.
Expectations for the PCE price index, excluding food and energy for the end of 2022, moved up a full percentage point to 4.2 percent.
With inflation hitting a near 40 year high, the Fed, which implemented the largest interest rates hikes since the early 2000s on May 4, is planning to continue its aggressive tightening policy to curtail rising costs.
The central bank is challenged with balancing raising rates enough to slow the economy down in order to get inflation under control without pushing it into recession.
Economists are becoming increasingly worried, as the odds that a recession will hit within the year rise.
Fifty-three percent of the respondents in the survey say that there is more than a 25 percent probability of a recession occurring within the next 12 months, while one third of the panelists suggest that a recession will not occur until 2024 or later.
Just 27 percent of panelists believe a recession will occur in the second half of 2023, while 25 percent expect a recession either by the end of this year or in the first half of next year.
About 40 percent said potential monetary policy missteps by the Fed are the greatest downside risk to the U.S. economy through 2022.
The panelists see hourly compensation rising 5.4 percent this year, up slightly from the 5.3 percent increase predicted in the February survey due to a tight labor market.
Monthly nonfarm payrolls in 2022 are now forecasted to increase by an average of 363,000, up from the 317,000 anticipated in the last survey.
Nearly 90 percent of panelists anticipate that core year-over-year PCE inflation will peak by the end of 2022.
