The United States has only a 23% chance of avoiding a recession: the slowdown could come sooner than expected.
The risk of a recession in 2024 cannot be overlooked, according to leading analysts.
The US economy may be on the verge of a recession, and signs of coming weakness may soon become evident, says bond kingpin Bill Gross, founder of Pacific Investment Management Company (PIMCO).
According to Gross there are signs that the slowdown could come sooner than expected. He noted that GDP growth expectations from the Atlanta Fed are below 1.5% for the current quarter, despite 4.9% growth reported in the third quarter.
“The effects will be seen in the fourth quarter,” Gross said in reference to a slowdown in GDP.
This is contrary to what other Wall Street commentators say, who point to the resilience of the economy and the likelihood that the United States will avoid a recession this year. Inflation has cooled significantly from highs above 9% in the summer of 2022, and the labor market has been strong in 2023.
However, the headwinds are becoming increasingly stronger. Bond yields rose last month to a 16-year high as investors worry about the impact of high interest rates over the long term. Meanwhile, regional banks have been devastated this year by the fall of Silicon Valley Bank and the rise of Treasury yields at the longer-dated end of the yield curve, Gross said.
“This usually indicates serious problems in terms of the economy,” he added.
Meanwhile, delinquency rates on consumer loans are starting to rise. According to Fitch Ratings data, a record number of at-risk borrowers are at least 60 days behind on auto loan payments.
“To me, this indicates that the consumer is falling behind in their ability to pay. And of course, the U.S. economy is 70% consumer spending,” Gross said.
The economy appears to be slowing as it nears the end of the year. The Bureau of Labor Statistics reported that only 150,000 jobs were created in October, below expectations of 180,000.
Leading analysts have warned that the risk of a mild recession next year cannot be ruled out. JPMorgan strategists have previously stated that a synchronized global recession is the most likely scenario in 2024, estimating that the US has only a 23% chance of avoiding it.
Original article published on Money.it Italy 2023-11-06 06:40:00. Original title: Per il re dei bond, Bill Gross (PIMCO), gli USA andranno in recessione
