Fitch Ratings predicts mild recession by spring

Financial services company Fitch Ratings predicted in a new report the U.S. will enter a mild recession akin to the 1990 recession starting in the spring of next year.

In the report obtained by The Hill, Fitch cut its gross domestic product (GDP) forecast for 2022 from 2.9 percent to 1.7 percent, while the company expects just 0.5 percent GDP growth in 2023.

This year has seen two consecutive quarters of negative GDP growth, usually a sign of a troubled economy.

Fitch predicts the nation will hit “genuine recession territory” by mid-2023, citing the continued hiking of interest rates from the Federal Reserve central bank and a 40-year high inflation rate.

“This reflects a lagged impact of aggressive Fed tightening, the drag on real wages from high inflation and knock-on impacts from the downturn in Europe,” the report reads.

Fitch compared the recession it is projecting for next year to the 1990 recession, which lasted from July 1990 to March 1991 and was sparked by high oil prices and the Federal Reserve’s tightening of the economy to control inflation.

Other leading economists believe the U.S. will enter a recession within the next year, despite healthy consumer spending and a low unemployment rate.

In a recent Wall Street Journal survey, 63 percent of economists said a recession will occur within the next 12 months, while JPMorgan Chase CEO Jamie Dimon warned the same last week.

Still, Fitch said consumer spending is “much stronger now” than in 2008 during the Great Recession, while the banking sector is healthy and the housing market is relatively stable.

But a “slowdown in job growth and rising unemployment next year will have a more widespread impact on consumer spending,” the report said.