A Financial Times survey of 51 economists, conducted in the days after the Fed’s January meeting, underscores the impact of the past month’s severe market turbulence and a string of lacklustre economic reports out of the US and China.
The fear that the world’s largest economy — considered the lone engine of global growth — is on the verge of recession has intensified. In the FT’s December survey economists had put the odds of a US recession at 15 per cent during the next two years. Now, they see a one-in-five chance of recession in the next 12 months.
Economists surveyed by the FT emphasised that while the odds of a recession had climbed, a large majority still expected the US to escape one. Several who have fielded increased investor calls on the subject said that the conversation had been skewed because of the near obsession with the price of oil — a point that they argued had more to do with supply than global demand.
Mr Gapen, who put the odds of a recession between 10 and 15 per cent, said that he still thought strong consumption trends would keep the US economy from contraction.
Rate Hikes Odds
Less than 5% of economists see a greater than 50% chance of recession.
Hikes Foreseen in December Survey
In December not a single economist thought the Fed would hike zero times in 2016.
Hikes Foreseen in January Survey
CME Fedwatch Odds
The Fed Fund futures show a nearly 50% chance of no hikes this year.
In contrast to Fed Fund futures, the latest Financial Times survey shows economists still expect two or three hikes this year. Over 10% of the economists foresee four hikes.
This is truly Fantasyland material.
Mike "Mish" Shedlock