Wells Fargo "Mild US Economic Recession Expected Late This Year to Early Next Year"

This Year's Economic Growth Forecast Lowered to 1.5%... Negative Growth Expected Next Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Major U.S. bank Wells Fargo has lowered its forecast for U.S. economic growth, anticipating a mild recession in the U.S. economy by the end of this year or early next year.

According to major foreign media on the 18th (local time), Wells Fargo Investment Institute lowered its forecast for the U.S. Gross Domestic Product (GDP) growth rate this year from 2.2% to 1.5%. It expects the GDP to decline by 0.5% next year. Previously, Wells Fargo had forecast a 0.4% increase in GDP for next year.

Wells Fargo explained that factors such as COVID-19 and lockdown measures, prolonged inflation, a strong dollar, the Russia-Ukraine war, and the Federal Reserve's aggressive tightening policies are burdens on the economy.

Charlie Scharf, CEO of Wells Fargo, attended an event hosted by The Wall Street Journal the day before and said, "There is no doubt about the slowdown in the U.S. economy," adding, "It will be difficult to avoid at least some recession." However, CEO Scharf also predicted that the financial conditions of consumers and businesses are sound and could help mitigate the impact in the event of a recession.

Wells Fargo's outlook is the most pessimistic among major U.S. banks. Other banks mostly warn of recession risks but view the likelihood as low.

Goldman Sachs recently estimated the probability of a U.S. recession at 15% over the next year and 35% over the next two years. Morgan Stanley sees a 25% chance of recession over the next year. Bank of America expects the recession probability to be low at this point but to increase next year.

Wells Fargo also lowered its year-end forecast for the New York Stock Exchange's S&P 500 index from the previous 4500?4700 range to 4200?4400. However, it maintained its forecast for S&P 500 earnings per share at $220.

Wells Fargo raised its unemployment rate forecast for this year from 3.4% to 3.8%, and its forecast for next year's unemployment rate from 4.0% to 4.4%. The forecast for this year's Consumer Price Index (CPI) inflation rate remained at the previous estimate of 7.7%.