Economists still see 50% chance of a recession this year

A majority of business economists believe the odds of a recession within the next 12 months are at 50% or less, according to a survey published by NABE.

An overwhelming majority of business economists still see a 50–50 chance the U.S. economy goes into a recession within the next year, according to a new survey published by the National Association for Business Economics. 

About three-quarters of respondents, 71%, reported the odds of an economic downturn within the next 12 months is about 50% or less. That marks a sharp reversal from April, when about 44% projected a more than 50% chance of a recession within the year.

More than one-quarter of economists pegged the likelihood of a downturn at 25% or less. 

"A majority of panelists is more confident about the economy over the next year as they see the probability of a recession diminishing," said Carlos Herrera, the NABE Business Conditions Survey chair and chief economist at Coca-Cola North America.

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The uptick in sentiment reflects rising sales and profits over the past three months. The survey indicates that the percentage of respondents reporting rising sales continued to outstrip those reporting falling sales. Businesses are also feeling more optimistic about future profits over the next three months. 

The economists also noted that material costs continued to fall at the beginning of the summer. 

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Finally, businesses reported that wages at their firms were unchanged during the second quarter for the first time since 2021. Rising wages have been a key component of the inflation spike in the U.S. as businesses competed with each other to hire a limited number of workers. 

"Results of the July 2023 NABE Business Conditions Survey reflect an economy of rising sales and profits, as material costs decline and stabilizing wages prove less challenging," said NABE president Julia Coronado in a release.

The survey, which was conducted between June 30 and July 12 and includes responses from 52 NABE members, comes amid signs of cooling inflation. 

The Labor Department reported earlier in July that the consumer price index (CPI), a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 0.2% in June from the previous month. Prices climbed just 3% on an annual basis, the lowest level in two years.

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The slow-but-steady decline in inflation, combined with the surprising resilience of the labor market, has fueled hope among some economists that the U.S. will successfully avoid a recession this year.

"I feel like we are on a golden path of avoiding recession," Chicago Federal Reserve President Austan Goolsbee said earlier this month.

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