Will U.S. Economy Slip into Recession Second Half of 2023?

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Per IPC’s June 2023 Economic Outlook report, the U.S. economy has remained resilient through the first half of the year, despite significant headwinds from stubbornly high inflation, aggressive interest rates hikes and a number of high-profile bank failures.

According to Shawn DuBravac, IPC’s chief economist, “This resiliency probably will not last. The second half will prove more difficult, and we expect the economy to slip into recession. The New York Fed’s recession probability model is currently showing a 70 percent chance that the economy experiences a recession within the next 12 months. The current consensus calls for a minor, short-lived recession in the second half of 2023. While a U.S. recession appears imminent, it is hard to know with certainty that it will be short-lived.”

Downward revisions in Europe pushed the economy down 0.1 percent in Q1. This follows a decline in Q4 of last year suggesting Europe did in fact slip into recession in the first half of the year. Many countries in Europe are still experiencing record levels of inflation. Hungary’s inflation rate is running at 21.9 percent while Estonia has seen prices rise 11.2 percent over the last year and prices in Lithuania are up 10.7 percent over the same time period. While these are down from earlier peaks, they remain high.

          Additional data in the June 2023 IPC Economic Outlook show:

• The U.S. labor market remains strong but might be showing some cracks. While workers are receiving higher wages, up 4.3 percent over the last year, consumer prices are up 4.9 percent over the same time. Wage gains are being lost to inflation.
•  U.S. industrial production fell 0.2 percent in April, though revisions to prior months offset the decline. The manufacturing sector rose 0.1 percent during the month.
• The European economy fell during the first quarter of the year, edging down 0.1 percent in the euro area, but rising 0.1 percent in the EU. The economy is up 1.0 percent in both the Euro area and the EU compared to the first quarter of last year.
• In EU end markets for electronics, manufacturing output appears to have risen in April, up 3.7 percent from the prior month and 1.3 percent from the year-ago period.

View June 2023 IPC Economic Outlook. For more information on IPC’s industry intelligence program including current research and reports, visit www.ipc.org/advocacy/industry-intelligence.