Our quantitative models are signalling a high risk of

a recession in the medium term (12-24 months).

But these require careful interpretation given the

receding risk in the near-term models, especially

over the three- and six-month horizons. This has

been primarily driven by the repricing of recession

risks in financial markets.

Other typical recession indicators, like the yield

curve and the Conference Board’s Leading

Economic Indicator (LEI), are still flashing red.

The loosening in the US labour market has so far

been benign, with declining vacancies rather than

higher unemployment helping lower inflation

pressures. But this may prove temporary. The final

leg of returning inflation to target could require a

move upward in unemployment.

Corporates may well cut back on hiring amid

increasing pressure on margins due to elevated

wage growth and higher financing costs.

Meanwhile, consumers also face growing

headwinds with depleted savings piles, the

resumption of student loan repayments and higher

debt servicing costs resulting from rates remaining

higher for longer.

Therefore, while the potential for a soft landing has

increased, we continue to see an eventual mild

recession as the most likely eventual outcome for

the US economy.

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