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The probability of a recession is approaching 50%, Deutsche markets survey finds

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U.S. dollar banknotes and a label with the word “Recession” are seen in this illustration taken March 19, 2025. 

Dado Ruvic | Reuters

Chances that the U.S. is heading for a recession are close to 50-50, according to a Deutsche Bank survey that raises more questions about the direction of the U.S. economy.

The probability of a downturn in growth over the next 12 months is about 43%, as set by the average view of 400 respondents during the period of March 17-20.

Though unemployment remains low and most data points suggest continued if slowing growth, the survey results reinforce the message from sentiment surveys that consumers and business leaders are increasingly concerned that a slowdown or recession is a growing risk.

Federal Reserve Chair Jerome Powell last week acknowledged the worries but said he still sees the economy as “strong overall” featuring “significant progress toward our goals over the past two years.”

Still, Powell and his colleagues at the two-day policy meeting that concluded Wednesday lowered their estimate for gross domestic product this year to just a 1.7% annualized gain. Excluding the Covid-induced retrenchment in 2020, that would be the worst growth rate since 2011.

Additionally, Fed officials raised their outlook for core inflation to 2.8%, well above the central bank’s 2% goal, though they still expect to achieve that level by 2027.

Jeffrey Gundlach: The chance of recession is higher than 50%

The combination of higher inflation and slower growth raise the specter of stagflation, a phenomenon not experienced since the early 1980s. Few economists see that era replicated in the current environment, though the probability is rising of a policy challenge where the Fed might have to choose between boosting growth and tamping down prices.

Markets have been nervous in recent weeks about the prospects ahead. Bond expert Jeffrey Gundlach at DoubleLine Capital told CNBC a few days ago that he sees the chances of a recession at 50%-60%.

“The recent equity market correction was punctuated by the ‘uncertainty shock’ of ever-evolving tariff policy, with investors concerned it could morph into a slowdown or even recession,” Morgan Stanley said in a note Monday. “What’s really at the heart of the conundrum, however, is that the U.S. might be at risk for a bout of stagflation, where growth slows and inflation remains sticky.”

Powell, though, doubted that a repeat of the previous bout of stagnation is in the cards. “I wouldn’t say we’re in a situation that’s remotely comparable to that is likely,” he said.

Barclays analysts noted that “market-based measures are consistent with only a modest slowing in the economy,” though the firm expects a growth rate this year of just 0.7%, barely above the recession threshold.

UCLA Anderson, a closely-watched and widely-cited forecasting center, recently turned heads with its first-ever “recession watch” call for the economy, based largely on concerns over President Donald Trump’s tariffs.

Clement Bohr, an economist at the school, wrote that the downturn could come in a year or two though he said one is “entirely avoidable” should Trump scale back his tariff threats.

“This Watch also serves as a warning to the current administration: be careful what you wish for because, if all your wishes come true, you could very well be the author of a deep recession. And it may not simply be a standard recession that is being chaperoned into existence, but a stagflation,” Bohr said.

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Economics

Trump advisor Hassett confident tariffs will stay despite judges’ ruling

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National Economic Council Director Kevin Hassett speaks to reporters at the White House in Washington, D.C., U.S., April 14, 2025. 

Kevin Lamarque | Reuters

A top economic advisor to President Donald Trump expressed confidence Thursday that court rulings throwing out aggressive tariffs will be overturned on appeal.

Kevin Hassett, director of the National Economic Council, said in an interview that he fully believes the administration’s efforts to use tariffs to ensure fair trade are perfectly legal and will resume soon.

“We’re right that America has been mishandled by other governments,” Hassett said during a Fox Business interview. “This trade negotiation season has been really, really effective for the American people.”

The comments follow a ruling from judges on the Court of International Trade who said Trump exceeded his authority on tariffs, which are aimed both at combating barriers against American goods abroad and stemming the flow of fentanyl across the U.S. border.

While the Centers for Disease Control and Prevention has said that fentanyl is the primary driver in domestic overdose deaths, the judges ruled that related tariffs “fail because they do not deal with the threats set forth in those orders.”

Hassett bristled at the ruling and said the administration will continue its anti-fentanyl efforts.

“These activist judges are trying to slow down something right in the middle of really important negotiations,” he said. “The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I am sure that when we appeal, this decision will be overturned.”

The administration has multiple options to get around the judges’ ruling, including other sections of trade laws it can utilize. However, Hassett said that’s not the plan at the moment.

“The fact is that there are measures that we can take with different numbers that we can start right now. There are different approaches that would take a couple of months to put these in place,” he said. “We’re not planning to pursue those right now, because we’re very very confident that this ruling is incorrect.”

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America’s immigration detention centres are at capacity

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Economics

Demand for American degrees is sinking

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Trump’s war on universities is driving talent away

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