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Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 301 | June 16-22, 2023.

5 reasons why top economist Mark Zandi says ‘this time is different’ and he’s ‘betting against’ a U.S. recession

By Will Daniel | Fortune Magazine | June 21, 2023

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Despite more than a year of consistent recession predictions from Wall Street’s top minds and dozens of Fortune 500 CEOs, the U.S. economy has remained remarkably resilient in 2023. And now, one of the world’s leading economists is making the case that his peers’ consensus forecast for a recession this year is “off base.”  “This time is different,” Mark Zandi, Moody’s Analytics chief economist, wrote in a CNN op-ed Tuesday titled, naturally.  Zandi isn’t alone in his increasingly optimistic outlook for the economy.  For Zandi, there are five key reasons why the economy could avoid a recession entirely this year, and they’re all “more or less unique to this time.”

1. Excess savings.  During the pandemic-era lockdowns, consumers weren’t able to spend as they typically would. At the same time, in order to stave off a recession, the federal government launched several stimulus packages that injected roughly $5 trillion into the economy.  This period of reduced spending, coupled with stimulus that boosted incomes, helped consumers sock away more cash than they typically would have. And with consumer spending accounting for roughly 70% of GDP, that money could prompt Americans to shop, enabling the economy to avoid a recession.
2. Labor hoarding.  The economist noted that businesses struggled to hire and find talent both before and during the pandemic, which makes them more likely to avoid layoffs at all costs moving forward.
3. Light debt loads.  “Households and businesses have borrowed prudently since the global financial crisis over a decade ago,” Zandi argued, noting that although household debt is near a record high, when compared with disposable income, consumers aren’t overly burdened.   Zandi also said that businesses are “devoting a near record low amount of their profits to debt payments, freeing up cash to finance hiring and investment.
4. Anchored inflation expectations.  While year-over-year inflation, as measured by the consumer price index, fell to 4% in May, it was still well above the Fed’s 2% target rate. But Zandi noted that inflation has been on a consistent downward trajectory and consumers’ outlook on potential price hikes has also improved.
5. Low oil prices.  Finally, Zandi said, there have been a dozen recessions since World War II, and almost all of them were “preceded by a spike in oil prices”—but that hasn’t manifested this time around. 

3 key takeaways from the article

1. Despite more than a year of consistent recession predictions from Wall Street’s top minds and dozens of Fortune 500 CEOs, the U.S. economy has remained remarkably resilient in 2023. And now, one of the world’s leading economists is making the case that his peers’ consensus forecast for a recession this year is “off base.”
2. “This time is different,” Mark Zandi, Moody’s Analytics chief economist claimed and he has five reasons:  consumers are sitting on excessive savings and consumers are the firewall between recession and a growing economy, and the firewall is holding firm; persistent labor shortage; light debt load, anchored inflation and low oil prices.
3. Zandi isn’t alone in his increasingly optimistic outlook for the economy.

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Topics:  USA, Recession, Inflation