Analysis: Risk of global recession falls substantially | Grant Thornton (2024)

FAQs

Is the US at risk for a recession in 2024? ›

A recession is unlikely in 2024, but the risk of inflation still looms.

After global growth exceeded expectations in 2023, businesses' perceived probability of a global recession has fallen substantially in 2024, according to Oxford Economics data. Oxford's global risk survey in January showed a recession probability of 7.2% — less than half of what it was in October 2023.

Fears of an economic recession may have to be pushed back to 2025, according to JPMorgan. US factory activity expanded in March for the first time since September 2022. JPMorgan said the rebound in manufacturing activity bodes well for continued economic resilience.

The U.S. economy has avoided a recession so far but the risk of a deeper economic downturn still looms, according to financial analyst Gary Shilling. Take U.S. small businesses as one of the “normal harbingers of recessions, [such as] the yield curve, the leading indicators,” Shilling said.

By March 2025, it is projected that there is a probability of 58.31 percent that the United States will fall into another economic recession.

1 According to the Sahm Rule, the early stages of a recession is signaled when the three-month moving average of the U.S. unemployment rate is half a percentage point or more above the lowest three-month moving average unemployment rate over the previous 12 months.

Economic recovery begins at the end of the year, but it will not be until 2026 that the recession is over. Consumption will be a key driver in the recovery. Lower interest rates and rising real wages will increase households' consumption growth from the end of this year.

We foresee both headline and core inflation falling to around 3% year over year by the end of 2024, down from 3.4% and 3.9% on a “trimmed mean” basis, respectively, in February. We expect inflation to fall to the midpoint of the RBA's 2%–3% target range in 2025.

Artificial intelligence (AI) and automation could lead to a white-collar recession in India by 2027, said a well-known technology analyst, Ray Wang, in an interview in January. Wang, who works with many Indian IT firms, said bot labour had already begun to replace human labour.

How will the US economy be in 5 years? ›

The U.S. Economy

Economic growth slows in 2024 as unemployment increases, partly as a result of tight monetary policy. Real (inflation-adjusted) GDP growth accelerates in 2025 after the Federal Reserve responds to weaker economic conditions in 2024 by lowering interest rates.

But economists at the World Bank expect that inflation will moderate over the next two years and by the end of 2026 interest rates will come down along with it, which experts say will buoy the housing market.

The last time the U.S. experienced a recession was in 2020. But that was a relatively short recession. The biggest recession in U.S. history sparked the Great Depression, between 1929 and 1933, though the Great Recession (2007-2009) was the worst in modern times.

The unemployment rate almost always jumps and inflation falls slightly because overall demand for goods and services is curtailed. Along with the erosion of house and equity values, recessions tend to be associated with turmoil in financial markets.

The US economy's ongoing normalization has progressed further through the second quarter. Amid healthy consumer fundamentals, we have revised up our GDP forecast for 2024 by 30 basis points (bp) to 2.5%, and for 2025 by 20 bp to 2.1%.

Inflation pulled back in May 2024. The consumer price index declined to a 3.3% annual rate, down from 3.4% in April. Prices have eased for consumer staples like gasoline and groceries. Housing inflation has been stubbornly high, though is falling slowly.

According to the National Bureau of Economic Research (NBER), the average length of recessions since World War II has been approximately 11 months. But the exact length of a recession is difficult to predict. In general, a recession lasts anywhere from six to 18 months.

Overall, despite an expected slowdown in the coming quarters, we expect the US economy to post real growth of 2.4% this year and 1.4% in 2025. Over the entire forecast, economic growth averages 1.8% per year, slightly higher than the long-term potential of 1.5% per year.