Moody’s warns: “Recession is a serious threat”

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European markets start in green this Wednesday -Ibex 35, CAC 40, DAX…-, waiting to know the minutes of the Fed’s last meeting.

Meanwhile, investors do not lose sight of the forecasts for this year that continue to come from the main analysis houses and rating agencies.

This is the case of Moody’s Analytics, whose chief economist, Mark Zandi, has been very emphatic in his latest analysis. “The U.S. economy will struggle in 2023 with steady growth and higher unemployment. Recession is a serious threat. Even if the US avoids a recession, the country could face a sharp slowdown that is unlikely to subside until 2024,” Zandi said.

Zandi has even coined a new term to describe this kind of prolonged recession, calling it “slowcession.”

The general view on Wall Street is that as the Federal Reserve cuts interest rates to help cushion the blow to investors and consumers, the U.S. economy will likely enter a brief recession during the first half of 2023, but it will end well before the end of the year.

Still, although Zandi believes that Interest rate hikes More aggressive Fed in decades will have a deleterious impact on GDP growth, he believes a strong U.S. labor market and other consumer-related factors should help stave off a full-blown contraction of the economy.

“There is no doubt that the economy will struggle next year as the Fed works to control high inflation, but the baseline outlook holds that the Fed will be able to achieve this without precipitating a recession,” Zandi warns.

Based on one set of forecasts, Zandi expects U.S. gross domestic product to grow about 1% or less year-over-year during the four quarters of 2023.

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