in

BofA Anticipates an Impending Economic Slowdown in the Coming Year



**Bank of America Economist Revises Recession Forecast for 2024**

After assuming the role of chief economist at Bank of America in July, Michael Gapen initially warned of a “mild recession” in the U.S. economy by the end of the year. However, he revised his forecast in September, stating that a recession wouldn’t occur until the first half of the following year. Now, Gapen’s predictions have proven premature as the U.S. economy continues to thrive. The unemployment rate remains near pre-pandemic lows, retail sales have been resilient, and the stock market has rebounded. As a result, Gapen has revised his recession forecast once again, now predicting a “softer” downturn in 2024.

**Gapen’s Revised Forecast and Economic Factors**

In his recent note to clients, Gapen acknowledged the improved risk backdrop and evidence of resilience in the economy, leading to the postponement of the anticipated downturn. However, he still believes that the Federal Reserve will need to raise interest rates to combat inflation, waiting for a significant increase in unemployment. Despite a slowdown in year-over-year inflation from its June 2022 high, it remains above the central bank’s 2% target rate.

Gapen emphasized that while the magnitude of the downturn has softened, the forecast now indicates more of a “growth recession” than a mild recession. A growth recession involves low but positive economic growth and rising unemployment, while a pure recession involves sustained economic contraction. He attributed the update to a rapid rebound in labor supply, facilitated by increased immigration and improved workforce participation rates. This rebound has contributed to low unemployment rates and subdued wage growth, which in turn has allowed inflation to decline without triggering a recession.

Additionally, Gapen pointed out that risks to U.S. economic growth have diminished in recent months, citing the passage of the debt ceiling and the Federal Reserve’s actions to manage stresses in regional banks. He also highlighted the Biden Administration’s initiatives aimed at spurring investment in the manufacturing sector, such as the CHIPS and Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA).

**Revised Growth Forecast and Positive Outlook among Investment Banks**

Gapen now anticipates a 1.1% increase in U.S. GDP in the fourth quarter of this year, compared to his previous prediction of a 0.2% drop. However, he has lowered his forecast for 2024 GDP growth from 0.9% to 0%, expecting the economy to spend most of next year recovering from its growth recession in the first half.

Bank of America is not the only investment bank adopting a more optimistic stance on the economy. Goldman Sachs economists have revised their recession forecast, indicating a reduced chance of a U.S. recession this year. Similarly, Stifel analysts claim that a “textbook recession” won’t occur in the near future.

**Conclusion**

Amidst persistent inflation and doomsday predictions, the U.S. economy continues to defy expectations. Gapen’s recession forecast has been repeatedly revised, reflecting the strength and resilience of the economy. With positive economic indicators and reduced risks to growth, Gapen and other investment banks have become more bullish about the outlook for the U.S. economy.



Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

The Future of Creative Industries: The Revolutionary Impact of AI Disruption

French Tech: AXA Venture Partners – Taking Innovation to New Heights