96% probability of US Recession

Because of the Federal Reserve’s interest rate hikes, the last quarter of 2022 and the first quarter of 2023 are likely to see negative real GDP growth rates.

An analysis by Ataman Ozyildirim, Senior Director, Economics

The Conference Board predicts a 96 percent likelihood of a recession in the US within the next 12 months, based on our probability model. This supports our expectation of a recession before the end of 2022 caused by the Federal Reserve’s interest rate hikes. The last quarter of 2022 and the first quarter of 2023 are likely to see negative real GDP growth rates.
 
While recession probability hovered near zero after the initial phase of the global pandemic from September 2020 to March 2022, it rose to over 30 percent in April and reached 50 percent in May. This means that the US economy is likely to enter a recession within a year from that point onward. The probability has kept rising since then.
 
Recession probability models are also useful in signaling the end of economic downturns. They tend to fall rapidly shortly before recessions end. In other words, the likelihood of the economy being in recession within the next twelve months falls below 50 quickly, usually within one or two months. We will monitor this measure to help assess when the US economy will start climbing out of the imminent recession.