According to a new study by former Bank of England member David Blanchflower, the US economy could head into recession again within the next six months if lower consumer expectations are some indication.
This is a counter-intuitive forecast, given that all stories of recovery and inflation concerns permeate the current economic controversy. US gross domestic product surged 6.7% annually in the second quarter, but consumer prices remained at 5.4% in the year to September.
But Blancheflower, now at Dartmouth College, and his co-author Alex Bryson suggest that the numbers above are just looking into the rear-view mirror.
“It seems quite possible that the United States fell into recession at the end of 2021,” the author wrote in a new research treatise. “The most compelling evidence comes from the expected data of the Conference Board of the eight largest states.”
They say the recent sharp drop in unemployment to less than 5% is due to unusually supportive fiscal policy, masking other signs of weak outlook.
These numbers show a decline comparable to that seen in 2007, just before the start of the worst recession of the generation.
Blanchflower says forecasters have completely overlooked the recession, despite warning signs from housing and finance that something is wrong.
“By the spring of 2007, qualitative data showed that a recession would come in a few months, which was ignored,” he says. “Today, we report on equal evidence of a comparable decline, suggesting that the United States is entering a recession at the end of 2021.”
This call contrasts with the private sector forecast and the Federal Reserve Board’s forecast that the US economy is expected to grow 5.9% this year and 3.8% next year.
Against this backdrop, authorities plan to curtail $ 120 billion in bond purchases each month starting in November, with financial markets beginning to price with their first rate hike as early as mid-to-late 2022. rice field.
“The Fed seems to be heading for a premature tightening,” said Blancchflower. “The Fed missed the Great Recession. The concern is that they missed the next recession.”
The results of Blanchflower and Bryson have been retained for a long period of time, giving them more confidence in their prognosis.
“Consumer expectations indexes from both the National Industrial Council and the University of Michigan show that the United States predicts a recession up to 18 months ago, both at the national and state levels,” they said. Is writing.
“All recessions since the 1980s are projected to decline by at least 10 points, and sometimes even more, on these indicators.”