As the ultimate days of December approach, it’s time for Wall Street’s favorite seasonal game: making predictions about whether the U.S. economy will fall right into a recession in the approaching 12 months.
Coming off a 12 months of record-setting stock market gains and lower — albeit still elevated — inflation, many financial pros are relatively sanguine concerning the outlook for 2025. For instance, the Securities Industry and Financial Markets Association’s Economist Roundtable has a generally upbeat attitude. The survey of greater than 20 economists found that, on average, respondents say they predict 1.9% GDP growth in 2025.
That’s lower than the common expectation of two.4% GDP growth in 2024 but suggests that the U.S. economy will keep chugging along without slipping right into a recession. Gross domestic product, or GDP, is a broad measure of the country’s economic activity. Economists are inclined to be completely happy with annual GDP growth within the 2% to three% range. Too little growth — or an economy that shrinks — raises concerns about recession, but runaway growth is not ideal, either, since an overheated economy can trigger inflation.
The National Bureau of Economic Research (NBER) is the quasi-official arbiter of when the economy enters and exits recessions, but a great rule-of-thumb definition for a recession links it to 2 consecutive quarters (half a 12 months) of negative GDP growth. That indicates the economy is contracting as a substitute of growing.
Will we’ve a recession in 2025?
Although no one has a crystal ball, the consensus appears to be that the economy will proceed to expand in 2025, albeit at a slower rate of growth than it did this 12 months. SIFMA says nearly half of roundtable members imagine the chances of a recession in 2025 to be 15% or less, while one other third estimate that the likelihood of a recession is between 15% and 30%.
Listed here are what some individual financial experts have predicted recently concerning the 2025 economy.
David Mericle, chief U.S. economist, Goldman Sachs Research
“Recession fears have diminished, inflation is trending back toward 2%, and the labor market has rebalanced but stays strong,” Mericle wrote in a Nov. 20 post, predicting 2.5% GDP growth for the 12 months.
He added that there are three big expected policy changes consequently of Republicans’ sweep of the White House and Congress that might affect the economy in 2025: more tariffs, tighter immigration policy and the extension of a slew of expiring 2017 tax cuts passed during President-elect Donald Trump’s first term.
Paul F. Gruenwald, global chief economist, S&P Global
“Even before taking office, a second Trump administration is already moving the macro-financial needle and raising downside risks,” Gruenwald wrote in a Nov. 27 research outlook. These implications transcend just the U.S., he explained, and will have a major impact on the worldwide economy.
“Potentially large changes in fiscal, trade and immigration policy from the U.S. are significant unknowns at this juncture,” he wrote. “Given the scale of the U.S. economy, policy motion on any of those fronts can move the worldwide needle.”
Still, Gruenwald said he predicts 2% GDP growth for the U.S. next 12 months.
Mark Zandi, chief economist, Moody’s Analytics
“I believe the economy is on solid ground,” Zandi said on a Dec. 4 episode of the podcast The David Lin Report. Zandi said he isn’t anticipating a recession in 2025 regardless of some labor market metrics indicating that a recession could possibly be imminent, because distortions within the labor supply threw off the calculus.
Although some potential changes teased by the incoming Trump administration, comparable to higher tariffs, could buffet the economy, Zandi said there remains to be reason for optimism. He told Lin, “I believe that can pose some threats and challenges… [but] I believe the basics are good.”
Joe Davis, global chief economist, Vanguard
Davis said in a Dec. 11 forecast posted on the firm’s site that a recession is not the firm’s “baseline” expectation, which calls for two.1% economic growth in 2025.
Neil Shearing, group chief economist, Capital Economics
Shearing said that even when the stock market were to return tumbling down next 12 months, it doesn’t necessarily mean a recession is within the offing.
“The bursting of this bubble can be a headline-grabbing event, but its macro consequences could possibly be surprisingly limited,” he wrote in an evaluation published Tuesday. “GDP may stagnate for a few quarters, however the recession that many might anticipate from that is not at all inevitable.”
Steven Hanke, professor of applied economics, Johns Hopkins University
After all, not everyone seems to be predicting a blockbuster economy next 12 months.
“My view is that the economy goes to decelerate and possibly will experience a recession next 12 months,” Hanke said in a Nov. 15 NYSE TV interview. He went on to warn concerning the potential impacts of Trump’s trade policies on economic growth, adding, “If he institutes plenty of the protectionist measures that he’s talking about, it should be an enormous negative for the economy.”
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