Economists are increasingly confident about the likelihood of a recession in the next 12 months according to a new Bloomberg survey.
The monthly survey conducted over the past week shows that the probability of an economic downturn rose to 47.5% from the 30% odds seen in June.
The Federal Reserve has conducted interest hikes in an effort to taper down skyrocketing inflation, but some experts believe that this could be the straw that breaks the camel’s back.
“[The Fed] has made it clear it is prepared to sacrifice growth as it desperately tries to get a grip on inflation via higher interest rates,” said James Knightley, chief international economist at ING.
“In this environment, we see the clear risks of retrenchment in consumer spending while falling corporate profitability means businesses start to hunker down.”
According to the survey, economists have lowered their predictions for growth during the second quarter from 3% to 0.8% seen in last month’s survey.
Additionally, gross domestic product for 2022 is averaging 2.1% compared to last month’s forecast of 2.6%.
The Fed’s key inflation metric is the personal consumption expenditures (PCE) price index which “reflects changes in the prices of goods and services purchased by consumers in the United States,” according to the Bureau of Economic Analysis.
Now, forecasts for this benchmark have been raised for each quarter this year, with experts noting that the PCE price gauge is averaging 6.3% during this quarter – 0.3% higher than last month’s predictions.