Optimism grows that the US may avoid a recession

US could sidestep a recession, say economists: With the Fed potentially halting its cycle of interest rate hikes, inflation easing, and growth surpassing expectations, economists have now put the chance of a US recession within the next year at 48%, down from a 54% average in July, the Wall Street Journal reports, citing data from its quarterly survey of business and academic economists. The results are the first time that the country’s recession probability has fallen below 50% since the middle of 2022.

Driving optimism: Strong jobs data and economic growth, falling inflation, and optimism that interest rates have reached their peak.

A case for a soft landing: The predictions relay confidence that the Fed will be able to create a ‘soft-landing’, a situation in which inflation falls without causing a recession, writes the WSJ. “The case for a soft landing has undeniably strengthened,” Deutsche Bank economists said.

But risks still remain: Deutsche Bank economics warned that despite the optimism,“headwinds such as depleted savings, tightening credit conditions, slowing income growth and return of student debt payments will weigh more appreciably over the next year.” Recent developments like the war in Gaza and the potential for regional escalation could also have unforeseen effects for the US economy in coming months.

THE CLOSING BELL-

The EGX30 rose 1.6% at yesterday’s close on turnover of EGP 2.6 bn (19.4% above the 90-day average). Local investors were net sellers. The index is up 39.2% YTD.

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