US Forecasters’ mailbag – top five Q&As on the economy Q2 2023

We receive many questions on the state of the US economy from clients. Here, we answer the top five most common, covering banking system stress, the impact of the looming recession, labor markets, inflation, and housing.

What you will learn:

• Various data show strains on banks are receding. Deposit outflows have slowed, take-up of the term funding program has moderated, and credit default swaps haven’t blown out.
• As the economy enters a mild recession that we forecast will arrive in H2, we think firms in the business-to-business space will struggle more than those who sell to consumers.
• A recession will help cool GDP, employment, and wage growth – as long as broader financial market conditions don’t ease. To lower services inflation, the Fed is aiming for jobs growth of around 100k/month and wage growth of roughly 3.5% y/y.