Economists warn recession risks for US economy

WASHINGTON -- Economists have warned of recession risks for the US economy amid rising government debts, a dim growth prospect and weak consumer sentiment.

JPMorgan's chief US economist Michael Feroli said, "We believe recession risks are still elevated, but now below 50 percent," down from a previous estimate of 60 percent on US sweeping tariff measures announced in early April.

JPMorgan Chase CEO Jamie Dimon said he wouldn't take the risk of recession "off the table."

"Hopefully we'll avoid it, but I wouldn't take it off the table at this point," he said in an interview with Bloomberg last week. "If there is a recession, I don't know how big it would be or how long it would last."

US billionaire investor Steve Cohen said at an investment conference in New York on Wednesday that "We aren't in a recession yet, but we have significant slowing growth," adding the chance of a US recession now stands at about 45 percent.

Moody's on Friday stripped the United States' top-notch ratings, citing rising government debt and interest payments.

"Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," it said.

"The downgrade of the US credit rating by Moody's is a continuation of a long trend of fiscal irresponsibility that will eventually lead to higher borrowing costs for the public and private sector in the United States," said Spencer Hakimian, founder of hedge fund Tolou Capital Management.

Moody's expected the federal deficits to widen, "reaching nearly 9 percent of GDP by 2035, up from 6.4 percent in 2024". "We anticipate that the federal debt burden will rise to about 134 percent of GDP by 2035, compared to 98 percent in 2024," it added.

Mounting fiscal concerns have further clouded the nation's long-term economic trajectory.

The outlook for the US economy "looks dimmer now than it did three months ago," the Federal Reserve Bank of Philadelphia said Friday in a new survey. According to 36 forecasters surveyed by the bank, they predict the US economy will expand at a 1.4 percent rate in 2025, down sharply from a 2.4 percent growth estimate before the trade wars flared up.

The number represents "the slowest clip in 16 years if the pandemic era is excluded," MarketWatch reported.

The US economy already shrank at an annual rate of 0.3 percent in the first quarter of this year, amid uncertain tariff policies.

Moreover, weak consumer sentiment added downward pressure to the economy.

Data issued by the University of Michigan on Friday showed that US consumer sentiment in May dropped for a fifth straight month to a near three-year low, with one-year inflation expectations soaring to levels last seen in late 1981.

"While a recession is no longer our base case over the next 12 months due to the recent reduction in tariffs, the likelihood has increased that the US economy will experience several quarters of sluggish growth," wrote Tuan Nguyen, US economist at RSM US LLP, in a note to clients.