Business Economists Remain Cautiously Optimistic Amid Cooling Inflation

 

A recent survey published by the National Association for Business Economics (NABE) indicates that an overwhelming majority of business economists see a 50–50 chance that the U.S. economy may enter a recession within the next year. Approximately 71% of the respondents believe that the odds of an economic downturn in the next 12 months stand at around 50% or less. This is a substantial shift from April, when about 44% of economists projected a greater than 50% chance of a recession within the year.

Carlos Herrera, the NABE Business Conditions Survey chair and chief economist at Coca-Cola North America, commented on the survey results, stating, “A majority of panelists is more confident about the economy over the next year as they see the probability of a recession diminishing.”

The more positive sentiment among economists is fueled by rising sales and profits over the past three months. According to the survey, a higher percentage of respondents reported increasing sales compared to those reporting falling sales. Additionally, businesses are feeling more optimistic about future profits in the coming three months.

The survey also highlighted a positive trend in material costs, which have continued to fall at the beginning of the summer. Furthermore, businesses reported that wages at their firms remained unchanged during the second quarter for the first time since 2021. This stabilization of wages is significant as rising wages have been a key factor contributing to the inflation spike in the U.S., as businesses competed for a limited pool of workers.

“NABE Business Conditions Survey reflect an economy of rising sales and profits, as material costs decline and stabilizing wages prove less challenging,” said NABE President Julia Coronado in a release.

The survey was conducted between June 30 and July 12 and collected responses from 52 NABE members. It comes at a time when there are signs of cooling inflation in the economy. The Labor Department’s recent report showed that the consumer price index (CPI), a measure of everyday goods’ prices like gasoline, groceries, and rents, rose by 0.2% in June from the previous month. The annual increase in prices was recorded at just 3%, the lowest level in two years.

The gradual decline in inflation, along with the labor market’s surprising resilience, has given some economists hope that the U.S. will manage to avoid a recession this year. Chicago Federal Reserve President Austan Goolsbee expressed optimism earlier this month, stating, “I feel like we are on a golden path of avoiding recession.”

As the economic landscape continues to evolve, economists and policymakers will closely monitor key indicators to assess the U.S. economy’s trajectory and its ability to sustain growth in the face of potential challenges.

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