The outlook of the U.S. economy does not look as bright as it was in the beginning of this year amid rising inflation after a rise of Consumer Price Index (CPI) in April by 8.3%, despite slower than 8.5% increase in March, but remains at a higher level not seen since the 1980s.
Over the year the CPI’s food index rose by 9.4%, representing the largest 12-month increase since April 1981. Meanwhile, the core-inflation index – which excludes food and energy – increased 0.6% in the month, up from March’s 0.3% gain.
JP Morgan cuts its forecast for the U.S. Gross Domestic Product (GDP) for the second half of 2022 and for 2023. The firm cuts US economic growth in 2H22 from 3% to 2.4% and cuts its 1H23 estimate from 2.1% to 1.5% and from 1.4% to 1% for the second half of 2023.
“It said there may be enough of a growth slowdown to lead to a gradual increase in the unemployment rate later next year, helping to relieve some wage pressures that have been building,” said JP Morgan in the research paper.
“In short, we forecast a soft landing, but are well aware that this outcome has rarely (if ever) occurred,” according to economist Michael Feroli in the research.
Meanwhile, Goldman Sachs recently gave the odds for a recession in the U.S. for the next year at 15% and 35% for the next two years.
Morgan Stanley indicated a probability of a recession in the next 12 months at 25%.
Bank of America said recession risks remain low for now, but should elevate in 2023.
In addition, Wells Fargo’s research also cuts US year-end 2022 GDPgrowth target from 2.2% to 1.5% and cuts its year-end 2023 target to a contraction of 0.5%, contrast to its previous forecast for a 0.4% GDP growth.