{"id":44583,"date":"2023-08-04T17:10:54","date_gmt":"2023-08-04T21:10:54","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/jpmorgan-abandons-u-s-recession-call-instead-sees-subpar-growth-in-2024\/"},"modified":"2023-08-04T17:10:56","modified_gmt":"2023-08-04T21:10:56","slug":"jpmorgan-abandons-u-s-recession-call-instead-sees-subpar-growth-in-2024","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44583","title":{"rendered":"JPMorgan abandons U.S. recession call, instead sees \u2018subpar growth\u2019 in 2024"},"content":{"rendered":"
\n

A top economist at JPMorgan Chase & Co.
\n JPM,
\n -0.21%<\/bg-quote>
\n no longer expects a recession to arrive in the U.S. before the end of 2023. He doesn\u2019t expect one in 2024 either, but said the risk of a potential downturn remains elevated. <\/p>\n

Michael Feroli, chief U.S. economist at JPMorgan, on Friday officially abandoned the bank\u2019s earlier recession forecast, putting the largest U.S. bank by assets more in line with others on Wall Street in thinking that a recession might be avoided even though the Federal Reserve has increased rates to a 22-year high.<\/p>\n

\n

Explaining his view in a Friday client note, Feroli cited improving third-quarter data, waning inflation and the increasing likelihood that the Fed will succeed in its effort to tame inflation without cracking the U.S. economy. <\/p>\n

Congress\u2019s temporary resolution of the debt-ceiling standoff in June, as well as U.S. authorities\u2019 efforts to shore up the U.S. banking system following the collapse of Silicon Valley Bank, also factored into Feroli\u2019s decision. <\/p>\n

In particular, he cited strong productivity data released earlier this week as one example of how labor supply is returning to a state of equilibrium. All of these developments helped inspire his decision to raise his forecast for third-quarter GDP growth to 2.5% from 0.5%.<\/p>\n

The productivity of American workers and companies rebounded in the second quarter and grew at a 3.7% annual pace, according to official government data. <\/p>\n

The rate surpassed economists expectations. According to Feroli, U.S. stocks may already be anticipating a further boost to productivity driven by the advent of the artificial-intelligence craze.<\/p>\n

While Feroli has removed the recession call from his base case, he acknowledged that risks of a downturn persist. Should inflation reaccelerate, it could provoke the Fed into more interest-rate hikes, which could bring down the economy. <\/p>\n

\u201cWhile we and the markets think it is done, it probably wouldn\u2019t take much of an upside inflation surprise for the FOMC to deliver the extra rate hike that was signaled in the June dots, with perhaps even more to come,\u201d he said. <\/p>\n

To be sure, even if a recession is avoided, Feroli expects growth to slow to a \u201csubpar\u201d pace as tighter bank-lending standards and less bountiful government spending take a toll. <\/p>\n

As for the Fed policy, Feroli expects the central bank will start cutting rates again in the third quarter of 2024. <\/p>\n

\u201cThe Fed reliably cuts rates in recessions. However, last week Chair Powell indicated that with rates now in restrictive territory, even absent a recession they have scope to adjust the funds rate lower in the event inflation comes down \u2014 which both he and we project,\u201d he said. <\/p>\n

\u201cSo while we don\u2019t foresee a rapid cutting cycle we do look for policy rates to be adjusted lower beginning in 3Q24.\u201d<\/p>\n

Here\u2019s a breakdown of Feroli\u2019s revised forecasts for unemployment, GDP growth and the fed-funds rate:<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

A recession call had been a bedrock of JPM\u2019s house views for months, with it codified in Feroli\u2019s 2023 outlook published late last year. It was integral to the banks\u2019 equity strategists bearish outlook on the stock market.<\/p>\n

See:<\/strong> Goldman chief economist sees reduced chance of recession and dismisses inverted-yield-curve worries<\/p>\n

The bank isn\u2019t alone. Economists and strategists at Goldman Sachs Group
\n GS,
\n +0.02%<\/bg-quote>,<\/span>
\n Apollo
\n APO,
\n +0.24%<\/bg-quote>
\n and elsewhere have dropped or tempered their recession calls, which were a consensus view among Wall Street economists heading into 2023. <\/p>\n

Stocks closed lower Friday, with the Dow Jones Industrial Average
\n DJIA
\n and S&P 500
\n SPX
\n posting their first weekly loss in three weeks, shedding 1.1% and 2.3%, respectively, since Monday. The Nasdaq Composite Index
\n COMP
\n booked its biggest weekly percentage drop since March 10, falling 2.9%, according to Dow Jones Market Data.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A top economist at JPMorgan Chase & Co. JPM, -0.21% no longer expects a recession to arrive in the U.S. before the end of 2023. He doesn\u2019t expect one in 2024 either, but said the risk of a potential downturn remains elevated. Michael Feroli, chief U.S. economist at JPMorgan, on Friday officially abandoned the bank\u2019s […]<\/p>\n","protected":false},"author":1,"featured_media":44584,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-44583","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nJPMorgan abandons U.S. recession call, instead sees \u2018subpar growth\u2019 in 2024 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"A top economist at JPMorgan Chase & Co. 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