Economic Growth Does Not Point to a Recession
An imminent recession is unlikely — but there still will be a lot of negative speculation about one occurring, said Anirban Basu, chair and CEO of Sage Policy Group in Baltimore.
One reason is that consumer sentiment is low. But a global economy that is holding steady together with reasonably low inflation, along with other factors, reflect that recession isn’t currently in the cards, Basu said during Institute for Supply Management®’s (ISM®) “Executive Briefing and Insights” webinar last week.
Looking deeper at various economic factors — both globally and in the U.S. — paints a clearer picture.
Percentages, Numbers and More
The global economy is projected to grow 3.3 percent this year, the same as last year, according to the International Monetary Fund’s (IMF) World Economic Outlook. The IMF U.S. forecast is 2.4 percent growth in gross domestic product (GDP). In India, which just experienced a reduction in U.S.-imposed tariffs, 6.4 percent growth is projected; China, 4.5 percent, Canada, 1.6 percent, and Germany, 1.1 percent, are other global examples.
Overall, a 1.8 percent growth is expected for advanced economies.
“I’m not saying these are stellar rates of growth,” Basu said, “but they are far from economic downturn. It’s moderate, it’s mediocre, but it’s growth.”
GDP isn’t the only factor to consider. As the global economy continues to adjust to protectionism and higher tariff rates, including in the U.S., global inflation is dropping, he said. The IMF projects 2.2 percent inflation in advanced economies, he said. However, the Consumer Price Index (CPI) and the Producer Price Index put U.S. inflation closer to 3 percent than 2 percent, Basu noted.
What Is and Isn’t Performing
Adding to the mix is that U.S. consumer sentiment, while slightly up from last month, is historically low, due to high prices, among other factors. “You ask Americans about the economy, and many will tell you they’re miserable about it. Their outlook is pessimistic, downright dour,” Basu said.
Additionally, the U.S. Federal Reserve (Fed) is keeping interest rates higher than normal, he said. Around the world, however, central banks are lowering interest rates, easing monetary policy and stimulating global economic expansion, he said: “It’s one of the reasons the global economy expects to expand once again in 2026.”
Job growth has decelerated: “If you look at the last nine months, despite the 130,000 (new jobs) in January of this year, according to the initial estimate, we (added) 16,000 jobs per month on average,” Basu said. During the nine months prior to that, the average was 82,000, he said. The 130,000 figure could possibly be revised lower, he added.
On the flip side, the big story is AI: AI expenditures are boosting the GDP, Basu said. Energy is another positive. Given the need for energy for data centers to support AI, energy use going forward will face a sea change, Basu said. Private construction spending on electric power generation and distribution is already elevated, and more investment is needed, he said.
The Growth Characteristic
Given the ups and downs, the projections and reports, Basu still doesn’t predict a recession. “The forecast is for growth in 2026,” he said. “I don’t think a recession is likely this year.”
But uncertainty remains. “There are some real risks out there, including rising interest rates, or at least flat interest rates, stubbornly high interest rates, and falling asset prices,” he said.
“There is a lot of uncertainty in the economic environment.”
(Photo credit: Getty Images/Hispanolistic)