Emerging Trend Report

Deconstructing The Puzzle: Falling Recession Fears Renew Prospects of A Soft Landing

Whether or not The Fed’s intense efforts to curtail inflation would cause a US recession has remained an elusive question for economists in 2023. While the steep rise in borrowing costs in the past year has visibly affected commercial real estate investment and homebuying, the worse recession fears have not come to pass. In this special report, the SVN Research team will deconstruct the current economic puzzle and detail how each piece fits into the look ahead.

A Demanding Consumer

The American economy found itself in an unorthodox position as it arose from the COVID-19 pandemic. Stimulus tools implemented during the pandemic towards businesses and consumers drastically increased the US money supply, resulting in robust labor market growth and a surge in US savings rates. Due to an unprecedented cutback of in-person economic activity during this time, a wave of pent-up demand flooded consumer markets in the pandemic’s aftermath. On the one hand, this has facilitated today’s high inflation environment. On the other, it appears to have enabled the US economy to weather the storm of tighter financial conditions. Despite 11 rate-hikes by the Federal Reserve over 19 months, economic output has remained robust, with consumer spending at the driver’s seat.

Read the full report here.