...the big bank is saying it, so people are paying more...

...the big bank is saying it, so people are paying more attention.
NAB predicts US recession next year

Alex Gluyas

National Australia Bank says the Federal Reserve’s move to restrictive monetary policy, alongside other global economic headwinds, will drag the US into a recession next year.

NAB expects the Fed to lift the funds rate above its estimated neutral level to a peak target range of 3.25 per cent to 3.5 per cent in early 2023.

This, alongside a commodity price shock and China disruptions due to COVID-19, will cause US growth slow to a “crawl” by around mid-2023, the bank said.

NAB lowered its GDP forecasts, and now expects growth of 2.3 per cent in 2022, and 1.1 per cent in 2023. Quarterly growth is expected to be weakest around mid-to-late 2023. NAB’s forecasts include a couple of quarters with growth of only 0.1 per cent quarter-on-quarter.

NAB downplayed the idea that a recession is only when there are two successive quarters of negative GDP growth. In the US, an increase in the unemployment rate of over 0.5 percentage points over a 12-month period has been associated with a recession being declared, the bank noted.

“So while we do not formally have negative GDP growth in our forecasts, they do meet this alternative recession rule,” said Tony Kelly, senior economist at NAB. “Therefore, we consider the risk of a recession is more likely than not.”