Wells Fargo Investment Institute raised its U.S. gross domestic product (GDP) growth forecast for the year on Tuesday, but said it expects the economy to “struggle to avoid” a recession early next year.
The institute now expects the U.S. economy to grow at 2.2 per cent in 2023, compared to 1.1 per cent forecast earlier.
It said the outlook beyond looks grim as it cut the 2024 GDP growth forecast to 0.7 per cent, from 1.5 per cent projected earlier.
“Parts of the economy already are in recession, and the spending and employment trends are weaker. Ultimately, we believe the economy will struggle to avoid a recession,” the Global investment strategy team at WFII said.
“Our expectations for firming inflation in the second half of 2023 and sustained weakening trends in the U.S. economy lead us to revise our U.S. economic forecasts to predict somewhat higher 2023 inflation and to shift the bottom of the economic cycle to early 2024,” it said.
It also raised its terminal rate forecast range for the U.S. Federal Reserve to 5.5 per cent to 5.75 per cent, as it expects the central bank to hike rates until disinflation “stalls too far from the Fed’s 2 per cent goal.”