The image, taken on March 19, 2025, shows US dollar bills and labels with the word “recession.”
Dado Ruvic | Reuters
The possibility that the US is heading towards a recession could be close to 50-50, according to a Deutsche Bank study that raises more questions about the direction of the US economy.
As set by the average viewing of 400 respondents from March 17th to 20th, the chances of growth falling over the next 12 months are approximately 43%.
While unemployment remains low and most data points suggest that growth will continue if not slowed, the findings reinforce the message from sentiment surveys that consumers and business leaders are increasingly concerned that slowing or recession is an increased risk.
Federal Reserve Chairman Jerome Powell admitted his concern last week, but he said he still views the economy as “a strong overall” characterised by “a great progress towards our goals over the past two years.”
Still, Powell and his colleagues at the two-day policy meeting that ended Wednesday have cut their gross domestic product estimates this year to an annual profit of just 1.7%. Excluding the 2020 COVID-induced reduction, this is the worst growth rate since 2011.
Additionally, Fed officials have raised their core inflation outlook to 2.8%, far above the central bank’s 2% target, but hopes to reach that level by 2027.
The combination of high inflation and slow growth is heightening the illusion of Stagflation, a phenomenon that has not been experienced since the early 1980s. While few economists see ERA replicas in the current environment, the probability of a policy challenge the Fed may have to choose between increasing growth and lowering prices is increasing.
The market has been nervous over the future outlook for recent weeks. Jeffrey Gundlach, a bond expert at Doubleline Capital, told CNBC a few days ago he saw a 50% to 60% recession potential.
“Recent stock market revisions are being separated by the ever-evolving “uncertainty shock” of tariff policies, and investors are concerned that it could turn into a slowdown or a recession,” Morgan Stanley said in a memo on Monday. “But what really lies at the heart of the challenge is that the US will grow slower and there may be risks of male dog matches with sticky inflation.”
However, Powell suspected that the card contained a repetition of previous stagnation. “We’re not saying we’re in a situation where we’re likely to rival that,” he said.
A Barclays analyst said “market-based measures are consistent with a modest slowdown in the economy,” but the company expects growth of just 0.7% this year, barely surpassing the recession threshold.
UCLA Anderson is a closely monitored and widely cited forecasting center, which recently turned his head to the first-ever “recession clock” call with a call for the economy, largely based on President Donald Trump’s tariff concerns.
School economist Clement Bohr wrote that the recession could come in a year or two, but he said it would be “completely avoidable” if he scales down his tariff threat.
“This clock also serves as a warning to the current administration. Beware of what you want, because if all your wishes come true, you could be the author of a deep recession. And it could be a stagflation rather than a standard recession chaperoned to being,” Bohr said.
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