The economy is holding up better than expected, but recession risk remains.
In the third quarter, easing inflation and stronger economic growth helped fuel optimism for a soft landing. However, monthly data suggest economic momentum is slowing, and we may not be out of the woods just yet.
Business spending has held up more strongly than expected due to higher spending on manufacturing and slowing corporate profits could still constrain growth in capital expenditures.
The housing market appears to have stabilized, albeit at low levels, due to tight housing supply. Trade should be a mild drag on the economy due to the lagged impact of a strong dollar and slowing momentum from the global economy.
Overall, the U.S. economy should continue to grow at a moderate but slowing pace from here, and while a near-term recession is not guaranteed, a slower-moving economy will be increasingly sensitive to shocks. With risks remaining on the horizon, we see at least a 50/50 chance of a recession starting by the end of 2024, and a greater chance of a recession in 2025 if one fails to materialize earlier.