PYMNTS-MonitorEdge-May-2024

Recession Fears Call For Weaker, But Longer Storm

The prospect of a U.S. recession is never a pleasant one, but there are some indications, according to Bloomberg, that though it may be lengthy, when and if it comes, it may not be deep.

The range of a downturn would be tempered by the continued resilience of the banking sector, which is decidedly well-capitalized, with households having relative stability in the wake of the Great Recession. The end result would be that the length would be determined in part by the fact that interest rates are not going to be able to stimulate the U.S. all that much.

Parallels may exist in recessions that occurred early in each of the past two decades, which were roughly eight months in duration and GDP dropping anywhere from 30 basis points to as much as 130 basis points. Economists surveyed by Bloomberg said that a downturn would not be like the one seen in the 2007–2009 period, where GDP slipped by more than 400 basis points.

Influence could come, in negative fashion, from the international stage, where global economies are less settled and stock markets have been wildly volatile. The latest consensus has the odds of a recession through the next 12 months in the United States at 20 percent, said Bloomberg, and that is up from 15 percent seen just three months. Growth is already slowing and is at 1 percent, down from 2 percent in the third quarter of 2015, as companies cut back on inventory building.

Other building blocks of past recessions, literally, have been absent. The housing bubble that marked past downturns is not to be seen here, with residential construction at about 3.4 percent of GDP, about half of peak levels. Mortgage debt is more than $1 trillion less than it has been in past years, most notably in 2008. Consumer spending is hardy, and credit card delinquencies are at the lowest levels seen in 15 years.

PYMNTS-MonitorEdge-May-2024