Economists Say Things Aren’t as Bad as They Expected But That Will Change
More than half of NABE members polled by the organization expect a recession in 2023.
The latest economic policy survey of 217 National Association of Business Economics members suggests a recession will happen in 2023, if a majority vote were to decide.
“Panelists generally agree on the outlook for inflation and the consequences of rate hikes from the Federal Reserve,” NABE Policy Survey Chair Mervin Jebaraj, University of Arkansas, said in prepared remarks. “More than seven in ten panelists believe that growth in the consumer price index (CPI) will remain above 4% through the end of 2023, and more than two-thirds are not confident that the Fed will be able to bring inflation down to its 2% goal within the next two years without inducing a recession.” More than a quarter (26%) described themselves as “not at all confident” and 43% said “not very confident.”
“Panelists were asked which factors they believe will be most instrumental in bringing down inflation,” said the report. “Tighter monetary policy is cited by 71% of respondents, lower commodity prices by 44%, supply-chain realignments by 42%, and weaker output growth by 40% of respondents. Higher productivity growth (cited by 24% of respondents) and a stronger U.S. dollar (cited by 12% of respondents) are less widely seen as instrumental.”
The Fed has been clear about getting to the 2% inflation goal and continuing to put pressure on the economy by keeping interest rates high. If CPI stays above 4%, chances would seem slim to none that the Fed would pull back on increased rates. The longer the higher pressure is in place, the greater the chance that the economy might slip beyond the central bank’s ability to stop or even reverse interest rate hikes.
About 53% of respondents think that current fiscal policy is too stimulative, while 41% found current fiscal policy is “about right,” while 5% thought it too restrictive. Fiscal policy is beyond the control of the Fed and is squarely in the hands of the legislative and executive branches.
In terms of recession timing, 5% said that the country is currently in one. That compares to 19% last August. About 16% expect that a recession will start in the second quarter of 2023; 24% say Q3 and 13% point to Q4. Then 12% said a recession would start in the first half of 2024; 22% said the second half of next year.