A machine-learning-based leading recession indicator places the odds of a downturn in the next 12 months at 49%. Tariffs and restrictive immigration policy are expected to produce inflation fallout that peaks in the vulnerability window of late 2025 to early 2026, reducing real household incomes and consumer spending. More than half of industries are already shedding workers, a pattern associated with past recessions. GDP growth is projected to fall to about 1% from 3%, with inflation peaking near 3.5% and possibly closer to 4% under continued large-scale deportations. Tax cuts and defense spending should boost growth, but only next year.
Zandi sees GDP growth hitting a low of 1%, down from 3% in the second quarter, with inflation peaking at 3.5%. The latest personal consumption expenditures price index showed the annual rate was at 2.6% in June, while the July consumer price index rose 2.7%. But even that outlook may be too low. Zandi previously told Fortune that if Trump continues deporting immigrants at the current rate, inflation could get closer to 4% if and when it peaks, likely early next year.
In a LinkedIn post on Thursday, Moody's Analytics chief economist Mark Zandi said his firm's machine-learning-based leading recession indicator put the odds of a downturn in the next 12 months at 49%. That comes weeks after he warned the economy was "on the precipice of recession" and that more than half of industries are already shedding workers, a sign that's accompanied past recessions.
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