According to the chief economist of a major bank, the economy is likely to sputter its way into difficult times as consumers run out of currency.
In predicting a 100 percent chance of a recession, David Folkerts-Landau, Deutsche Bank’s chief economist, wrote, “The U.S. is heading for its first genuine policy-led boom-bust cycle in at least four decades,” USA Today reported Thursday.
“The inflation we see was induced largely by expansive fiscal and monetary policy, and the aggressive rate hikes needed to tame that have now materialized. Avoiding a hard landing would be historically unprecedented,” he wrote.
Folkerts-Landau stated that the Federal Reserve’s ongoing fight to reduce inflation without plunging the economy into a depression has not been entirely successful. The unemployment rate is expected to increase from 3.7% in May to 4.5% in the first three months of 2024, a presidential election year, despite the decline in inflation.
In addition, he stated that by October, the excess savings that many Americans accumulated during the pandemic will be gone, resulting in a reduction in consumer spending.
Folkerts-Landau predicted that a “moderate recession” will commence in the last quarter of 2023 and continue through the first quarter of 2024.
This could be detrimental to the re-election campaign of Vice President Joe Biden.
Deep recession … massive electoral chaos.
Very difficult for Joe Biden to win. His approval numbers are already low in 37% to 40% range. With a deep recession, his numbers will get worse.
— Wall Street Silver (@WallStreetSilv) June 15, 2023
Folkerts-Landau is not alone in predicting impending darkness.
Darrel Cronk, president of Wells Fargo Investment Institute, said that “recession is at our doorstep,” Fortune reported Friday.
“Much of the manufacturing sector of the economy is already in recessionary territory,” Cronk said.
Justyna Zabinska-La Monica, senior manager of Business Cycle Indicators at The Conference Board, said recent data indicate “a worsening economic outlook,” saying that “weaknesses among underlying components were widespread.”
Thursday, Missouri Republican Representative Jason Smith stated that Biden’s economic policies are to blame for the nation’s economic malaise.
“President Biden’s reckless actions have put the Federal Reserve between a rock and hard place,” he said in a statement in a news release on the website of the House Ways and Means Committee. “The Fed is having to choose between hiking interest rates to combat the inflation crisis caused by reckless Democrat spending, risking the health of our overall economy, or pausing those rate hikes and hoping prices do not continue to spiral out of control.
“Even with a pause in interest rate increases, Americans are already paying more to get a loan or afford a mortgage while the inflation crisis continues to rob them of their hard-earned dollars.”
A recent CNBC/Morning Consult survey found that many consumers are already reducing back.
The survey revealed that 92% of Americans with annual incomes between $50,000 and $100,000 are “somewhat” or “very” concerned about rising prices.
Eighty percent of respondents said they had reduced spending on non-essential items, while roughly two-thirds said they were attempting to find cheaper alternatives to their customary brands for essentials.
Seventy-seven percent of respondents to the survey said they intend to reduce their expenditures on non-discretionary commodities even further in the future.
Clothing headed the list of non-essential items on which consumers are spending less, with 63 percent of respondents indicating they are purchasing less since the beginning of the year.
A survey of over 4,400 adults was conducted online earlier this month. No inaccuracy margin was provided.