London Daily

Focus on the big picture.
Wednesday, Jul 08, 2026

US economy could be headed toward recession, economist warns: '100% odds' of global slowdown

US economy could be headed toward recession, economist warns: '100% odds' of global slowdown

Rising interest rates and soaring inflation could dampen consumer spending

The U.S. economy could be barreling toward a recession in the next year, as persistently high inflation and an increasingly hawkish Federal Reserve weighs on growth.

Greg Daco, chief economist at EY-Parthenon, warned in a new analyst note that the odds of an economic downturn in the U.S. over the course of the next year are somewhere between 35% and 40%.

There's an even greater risk of a global downturn.

"A U.S. recession is unlikely in the very near term, but there are several uncertainties on the horizon," Daco wrote. "While I put the odds of a U.S. recession somewhere around 35-40% in the next 12 months, the odds of a material global growth slowdown are close to 100% in the next six months."

While the U.S. economy remains strong in the interim, "cracks are starting to appear in the foundation," he wrote. Sky-high inflation, rising interest rates and depressed financial markets are likely to weigh on consumer spending in coming months. Consumer spending accounts for about two-thirds of gross domestic product, the broadest measure of goods and services produced in the nation.

A man shops at a Safeway grocery store in Annapolis, Md., May 16, 2022.


"With the Fed tightening the monetary policy spigot with increased determination and the global economic outlook turning bleaker, the U.S. economy will grow more susceptible to a downturn in the coming months," Daco wrote.

Economic growth in the U.S. is already slowing. The Bureau of Labor Statistics reported earlier this month that gross domestic product unexpectedly shrank in the first quarter of the year, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession.

The analysis comes amid growing fears on Wall Street that the Fed may drag the economy into a recession as it seeks to tame inflation, which climbed by 8.3% in April, near a 40-year high. Bank of America, as well as Fannie Mae and Deutsche Bank, are among the Wall Street firms forecasting a downturn in the next two years, along with former Fed Chairman Ben Bernanke.

"The Fed is attempting to thread the needle while wearing boxing gloves and a mouth guard, which reduces its degrees of freedom to act without causing damage to the real economy," said RSM Chief Economist Joe Brusuelas, who has questioned whether the central bank will be able to achieve a soft landing.

Policymakers raised the benchmark interest rate by 50 basis points earlier this month for the first time in two decades and have signaled that more, similarly-sized rate hikes are on the table at coming meetings as they rush to catch up with inflation.

Federal Reserve Chairman Jerome Powell, right, testifies before the Senate Banking Committee on Capitol Hill. 


Fed Chairman Jerome Powell has acknowledged there could be some "pain associated" with reducing inflation and curbing demand but has pushed back against the notion of an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. Still, he has warned that a soft landing is not assured.

"It's going to be a challenging task, and it's been made more challenging in the last couple of months because of global events," Powell said Wednesday during a Wall Street Journal live event, referring to the Ukraine war and COVID lockdowns in China.

But he added that "there are a number of plausible paths to having a soft or softish landing. Our job isn't to handicap the odds, it's to try to achieve that."

Comments

Oh ya 4 year ago
Gee surprise not a word mentioned about the Fed printing boatloads of money and handing it out. The goverment wants to give 40 billion to the most corrupt country in Europe and it has to borrow it from the Chinese. If printing money is not a problem please explain to me about Venezuela, Argentina, Perú, Germany.

Newsletter

Related Articles

0:00
0:00
Close
Federal Financial Framework Shifts as Treasury Launches Universal Savings Program for Minors
French Court Allows Le Pen to Run for Presidency, but with an Electronic Tag: "I Will Appeal, and I Will Run"
$1.4 Trillion: The Lawsuit That Could Crush Meta
Europe's Growing Struggle with Extreme Heat and Air Conditioning
UK Daily Briefing: Legal Developments and Social Issues
Political Turmoil and Rising Costs
Anthropic Reengineers Agentic Architecture to Shift Autonomous Workplace Automation to the Cloud
Logic Flaw in Windows 11 Permission Architecture Silently Consumes Hundreds of Gigabytes of Local Storage
Apple Advances Late-Stage Operating Systems with Fourth Beta Deployments
Global Crisis Alert: Escalating Middle East Tensions and UK Political Upheaval
UK Parliament Pushes for Greater Domestic Control Over Critical Technologies
UK Parliament Warns Trade Fair and Exhibition Industry Is Losing Global Competitiveness
Police Launch Murder Investigation After Mother and Two Children Found Dead Near Bedford
British Chambers of Commerce Survey Shows Business Confidence Falls to Post-Pandemic Low
UK Parliament Report Warns Britain Risks Falling Behind in Artificial Intelligence Sovereignty
Office for Budget Responsibility Warns United Kingdom Faces Long-Term Fiscal Pressures
Nigel Farage Resigns as Member of Parliament Amid Financial Scrutiny and Triggers By-Election
Deep Purple Has Released Its Best Album in Decades
UK MPs Criticise Student Loan System as Potentially Mis-Sold to Millions of Borrowers
Policy Groups Propose Bank of England-Backed Solar Loan Scheme for Millions of Homes
UK Health Agency Issues Amber Heat Alerts Across Six Regions as Temperatures Rise
Royal Air Force F-35 Jets Conduct First High North Air Policing Missions From Aircraft Carrier
Major UK Companies Join Government Cybersecurity Pledge Amid Rising Digital Threats
UK Sanctions Russian Operatives Linked to Chemical Weapons Programmes and Poisoning Cases
UK Government Expands Free Breakfast Clubs and Limits School Uniform Costs
UK Water Companies Face Tougher Penalties Under New Environmental Enforcement Rules
UK Universities Warn Funding Cuts Could Damage Skills Pipeline and Economic Growth
NHS Expands Artificial Intelligence Tools to Help Reduce Patient Waiting Lists
NHS Ombudsman Criticises Failures in End-of-Life Communication and Patient Care
NHS Launches Nationwide Vaccination Drive After Rise in Measles Cases
UK Government Introduces New Limits on Foreign-Linked Political Donations
Thames Water Creditors Advance £10 Billion Rescue Plan to Prevent Potential Public Ownership
Andy Burnham Prepares Labour Leadership Platform as Party Faces Post-Starmer Transition
UK Met Office Issues Heatwave Alerts for London and Southern England
Keir Starmer Blocks Earlier World Cup Kick-Off Time for England Match Against Mexico
NHS Digital Transformation and Media Consolidation Highlight UK Policy Priorities
UK Government Pushes Digital Trade Rules to Cut Export Costs for Businesses
Bank of England Plans Leverage Rule Changes to Support Government Bond Market
UK Police Operation Targets Organised Immigration Crime Networks With Hundreds of Arrests
Yvette Cooper Calls for Global AI Rules to Prevent Security Risks
NHS Begins Major AI Expansion Through £10 Billion Digital Investment Programme
UK Government Tightens Rules on Political Donations to Limit Foreign Influence
Keir Starmer Defends UK Defence Spending Plan at NATO Summit in Turkey
Comcast’s Sky Agrees £1.6 Billion Deal to Acquire ITV Media and Entertainment Division
Senior NHS Doctors Vote in Favour of Renewed Strike Action Over Pay Dispute
Andy Burnham Set to Succeed Keir Starmer as Labour Leadership Nominations Open
Microsoft Lays Off 4,800 Employees and Xbox Suffers the Hardest Blow
Office for National Statistics Updates Historical Investment Data Review to Improve Accuracy
Department for Science, Innovation and Technology Highlights Economic Gains From Digital Inclusion
Debate Intensifies Over UK Defence Strategy and Domestic Security Priorities
×