December 24, 2022 — Economists spent most of 2022 convincing themselves that the global economy was about to fall into recession, if it wasn’t already in one. With the year over, the global recession has now been postponed to 2023.
- Tour d’horizon
In the US, reports that a recession had begun in the first half of the year clearly were premature, especially given how tight the labor market was. It still is. The chances of a downturn in the coming year are well below 100%, despite the confidence with which many say it is certain. It is foolish to think we can predict a recession with certainty. But the chances are indeed far above the usual 15 %. I would put the odds at perhaps 50-50 in 2023 and 75% at some point during the next two years. The main reason is the rapid raising of interest rates by the Fed (and other central banks), of course, which in turn is attributable to high inflation.