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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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Consumer confidence in where the economy is headed hits 12-year low

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Shoppers walk near a Nordstrom store at the Westfield UTC shopping center on Jan. 31, 2025 in San Diego, California.

Kevin Carter | Getty Images

Consumer confidence dimmed further in March as the view of future conditions fell to the lowest level in more than a decade, the Conference Board reported Tuesday.

The board’s monthly confidence index of current conditions slipped to 92.9, a 7.2-point decline and the fourth consecutive monthly contraction. Economists surveyed by Dow Jones had been looking for a reading of 93.5.

However, the measure for future expectations told an even darker story, with the index tumbling 9.6 points to 65.2, the lowest reading in 12 years and well below the 80 level that is considered a signal for a recession ahead.

The index measures respondents’ outlook for income, business and job prospects.

“Consumers’ optimism about future income — which had held up quite strongly in the past few months — largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” said Stephanie Guichard, senior economist, Global Indicators at The Conference Board.

The survey comes amid worries over President Donald Trump’s plans for tariffs against U.S. imports, which has coincided with a volatile stock market and other surveys showing waning sentiment.

The fall in confidence was driven by a decline in those 55 or older but was spread across income groups.

In addition to the general pessimism, the outlook for the stock market slid sharply, with just 37.4% of respondents expecting higher equity prices in the next year. That marked a 10 percentage point drop from February and was the first time the view turned negative since late-2023.

The view on the labor market also weakened, with those expecting more jobs to be available falling to 16.7%, while those expecting fewer jobs rose to 28.5%. The respective February readings were 18.8% and 26.6%.

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