Quick Bites | Odds of US recession falling

A strong majority of business economists now say the odds of the US entering a recession in the next 12 months are 50% or less, according to the National Association for Business Economics (NABE) survey.

Some 71% of respondents reported shared that view, marking a sharp turnaround from NABE’s previous survey in April, which showed an almost even split between those forecasting a downturn and those who were not. More than one in four respondents in the July survey put the chance of a recession in the next year at 25% or less.

Ongoing strength in the labor market and a pullback in key consumer prices have helped fuel the shift in sentiment. While economists have in recent months repeatedly altered their forecasts for when a potential recession may begin, the NABE survey result suggests many are now changing their minds altogether on the inevitability of one occurring.

A greater share of survey respondents, who are employed at firms across a number of industries, reported improved profit margins at their companies, and an increased share also said they were passing some or all of recent cost increases on to consumers.

Meanwhile, the US reporting season continues to deliver marginally better results than forecast. At the time of writing this note, 89 companies in the S&P 500 Index had reported earnings for Q2 2023. Of these companies, 73% reported earnings above analyst expectations, and 19% reported earnings below. In a typical quarter (since 1994), 66% of companies beat estimates and 20% miss estimates.

In aggregate, companies are reporting earnings that are 7.4% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.1%. The estimated earnings growth rate for the S&P 500 for Q2 2023 is -7.9%, however if the energy sector is excluded, the growth rate improves to only -2.2%.



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