A recession is usually defined as a period of reduced economic activity and is most commonly associated with a country whose gross domestic product (GDP) has declined for two or more continuous quarters. A recession is especially terrible for the medium to low income earners, and its consequences include but are not limited to a similar decline to consumer demand for normal goods, employment, and economic output. According to a new recession probability model by Bloomberg economists, Anna Wong and Eliza Winger, it appears to have established the possibility of a recession in the United States hitting 100% in the next 12 months.
Firstly, a recession hitting the US is extremely negative for the vast majority of the world. Being the economy with the largest GDP and the second largest exporter of goods means that any decline in economic output would negatively impact the economies of countless countries across the world (Statista research department). Economic output is reduced as a result of a recession, something the effect of which could be felt during the Great Recession: a global economic loss in growth by 2 trillion dollars between the pre and the low-recession peak in 2009 (Merle Renae).
Bloomberg economists, Anna Wong and Eliza Winger created the latest recession probability models by using 13 macroeconomic and financial indicators to forecast the chances of a decline in the American economy. These models forecasted a higher recession probability as they have a 12 month estimate of an economic decline by October 2023 hitting 100% up from 65% in the previous update. Although, the model predicts a sooner recession within 11 months at 73% probability and 25% within 10 months – which rose from 0%.
The average recession since 1950 lasted just 10 months. Therefore, if the US encounters a recession they will have to be prepared as it could bring many problems to the country, and to the world. Even though there is a great probability that this recession might happen, there is still the slight chance that it might not.
Image Source: Gulf News
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