US may dodge recession but concerns remain, say bank chief economists

investmentnews.com:

The recession question is never far away and there is no consensus on when or how deep it will be.

While wealth and asset managers expect a recession in the next year according to a recent poll, a panel of 14 chief economists from some of the largest U.S. banks believes that a soft landing is looking more likely, although recession can’t be ruled out.

The members of the American Bankers Association’s Economic Advisory Committee expect growth to slow from an annualized 2.4% in the first three quarters of 2023 to less than 1% in the fourth quarter of this year and the first half of 2024 (annualized).

Even as the pace of growth picks up in the second half of 2024, the economists believe activity will be below potential.

The median committee forecast therefore does not call for any contractions, thus avoiding even a technical recession over two consecutive quarters, there is still concern that the delayed impact of monetary tightening, deteriorating credit availability, and high credit costs could trigger a mild recession.

Any event such as a prolonged government shutdown or geopolitical tensions could also lead to a mild recession and the committee says that the overall near-term recession risk is approaching 50% for 2024.

“The odds of the Fed achieving a soft-landing look much better today than they did six months ago,” said Simona Mocuta, committee chair and chief economist at State Street Global Advisors. “However, the battle against inflation is not yet won, so the Fed must remain vigilant. At the same time, there is a better balance between supply and demand across the board, in goods, services and labor markets. This helps the ongoing disinflation process.”

The committee expects consumer inflation to halve from 4%