While inflation has fallen significantly over the past few months, further falls at this magnitude and/or even greater levels will likely be required to avoid a recession.Unemployment is expected to stay below 5% in 2023 however, supply-side shortages within the labor market risk driving further inflation as upwards pressure on wages continue.This is expected to be most acute in higher income groups, which have seen the largest declines in real wages. Real wage declines coupled with low consumer confidence will translate into a drop in consumption.bucks the global trend with more well-off home owners seeing larger declines. Without a material softening of inflation towards the 2% level, we will see real wages continue to fall across 2023. However, a repeat of the previous housing crisis is extremely unlikely. This is, in itself, a risk to the long-term stability of the U.S. While they will help in managing inflation, they will also continue to impact borrowing and activity in the housing market. Interest rates are expected to remain high across 2023.This is impacted by wage pressures, continued geopolitical turmoil and lack of interest rate effectiveness. While we expect to see a material softening on inflation in 2023 compared to 2022 figures, there is a real risk that inflation remains at the 4-5% level for the foreseeable future.Prolonged high inflation will have a substantial impact on consumption, which could tip the U.S. lands within this range of outcomes depends materially on how quickly inflation returns to target levels. Note: 1Levels of Inflation forecast for December 2023, 2Interest rate outlook as of December 2023, 3Annual GDP growth outlook for 2023, 4Following the commencement of the recession economy, there remains a significant macroeconomic uncertainty, with the very real possibility that the economy could be about to enter a deep and lengthy recession. While there is cause to be optimistic about the U.S. going forwards from a soft landing to the risk of long-term inflation and a deep recession. In this paper, we outline four potential economic scenarios for the U.S. is seeing the biggest real wage declines in the wealthiest income brackets, which make up the majority of consumption. Consumer confidence is at record lows, and the U.S. The line between a soft landing and a recession is thin. Despite evidence of declining real wages, this has not yet translated into declines in household consumption. Positive indicators point to its achievability – inflation is down, the labor market remains strong. In other words, manage the dual challenges that rising inflation and rising interest rates have on economic growth while avoiding a recession and achieving its fabled soft landing. government is currently trying to navigate its economy through a challenging inflationary period and orchestrate an outcome that has never been achieved. could be about to enter a prolonged recessionary period. economy, there remains a very real risk that the U.S. While there is evidence of growth against a backdrop of global uncertainty for the U.S. Included are forecasted key macroeconomic factors such as inflation, GDP and employment, and considerations of a wide range of implications for businesses, including consumer spending and behavior patterns, as well as employment, rising inventories and access to credit. economy faces are likely to evolve in the next 12-18 months. In this paper, Teneo utilizes a combination of modelling, detailed analysis and commentary from highly respected advisers across a range of subjects, including politics, economics and consumer demand, to develop a comprehensive view of how the challenges the U.S. To manage this, the Federal Reserve has reacted quickly, raising interest rates earlier and more aggressively than any other major economy. Supply chain disruptions, rising global commodity and energy prices, volatility in major economies and underlying demographic factors have all contributed to rising prices. economy is currently experiencing levels of inflation that have not been seen in 40 years.
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