Holding Up

The U.S. economy has been underperforming this year, by both recent and historical standards. Real gross domestic product (GDP) has declined for two quarters in a row. This is a technical recession, not a broad one; nonetheless, concerns are rising as to when recession could come, how severe it will be, and how long it will last.

Looking at the larger picture, a downturn is not assured. Forward-looking indicators of industrial activity are still in positive territory, and labor markets still have plenty of momentum. Inflation has started to ease a bit, which will increase real output; continued hawkishness by the Federal Reserve will also help to cool price increases in the coming quarters.

The central question surrounding the outlook is whether it will require a recession to bring inflation under control. We don’t think so, but it’s going to be a very close call on the soft landing.

Key Economic Indicators

Influences on the Forecast