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HomeBusinessEconomist: Recession 'litmus test' arrives as long-awaited reckoning approaches.

Economist: Recession ‘litmus test’ arrives as long-awaited reckoning approaches.

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Economist David Rosenberg has reiterated his prediction of an imminent recession in the United States. Despite facing some criticism for his previous forecasts, Rosenberg remains convinced that a downturn is inevitable within the next six months. He argues that rising oil prices, high mortgage rates, and the resumption of student loan payments will exacerbate the economic challenges already being faced by the US, including union strikes and inflation. Rosenberg expects consumer spending to slow down significantly in the fourth quarter, particularly with the increasing cost of gasoline, and sees this period as a crucial test for his recession forecast.

Rosenberg also draws parallels between the current economic situation and the events leading up to the Great Recession of 2008. He emphasizes the impact of rising interest rates, which historically have a lagging effect on the economy for about two years before a recession begins. He points out that the US consumer has been a driving force behind the economy’s resilience in recent years, fueled by fiscal stimulus and increased credit card spending. However, he warns that consumers cannot rely on credit cards indefinitely and predicts that as fiscal stimulus fades away, consumer spending will inevitably slow down. Despite the potential positive impact of the Infrastructure Investment and Jobs Act and the CHIPS Act on industrial and manufacturing sectors in the near future, Rosenberg believes they will not outweigh the importance of consumer spending, which accounts for 70% of the US GDP.

Rosenberg’s unwavering stance on a recession echoes his previous experiences, particularly in correctly predicting the Great Recession in 2008 despite criticism at the time. However, he acknowledges that his past predictions about recessions in 2012 did not come to fruition. Nonetheless, he remains resolute in his belief that the current economic circumstances are reminiscent of the pre-2008 period and sees the potential for history to repeat itself.

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