Wall Street is basking in a newfound optimism, as top economists predict a sunnier outlook for the US economy.
A recent Wall Street Journal survey of 65 leading economists revealed a drop in the predicted chance of a recession within the next year.
The consensus? A 48% probability, down 6 percentage points from three months ago. It’s the first dip below the ominous 50% mark in a year, hinting at a potential economic upswing.
This isn’t just wishful thinking. A cocktail of factors is fueling this positive business forecast. Falling prices, a halt in interest rate hikes by the Federal Reserve, a sturdy labor market, and economic growth are all stirring up confidence.
These robust indicators have economists forecasting a 2.2% year-on-year growth for the US economy, a far cry from the gloomy 1.0% prediction made in July.
But it’s not all sunshine and rainbows. Economists are keeping a wary eye on potential stumbling blocks. Geopolitical crises in the Middle East and uncertainty around bond interest rates could throw a wrench in the works, potentially sparking a recession.
Despite these potential pitfalls, there’s a silver lining. Economists are banking on the Federal Reserve’s ability to pull off a ‘soft landing’, where inflation drops without triggering a recession.
They’re predicting inflation to cool down to 2.4% by the end of next year. But hurdles like dwindling savings, tightening credit conditions, slowing income growth, and the looming return of student debt payments could still put pressure on the economy.
In the face of these challenges, the latest survey has sparked cautious optimism among economists. It’s a potential turning point in the US economic story, a tale that’s far from over.