There’s a 30% chance of US recession: S&P Global

The probability of a US recession beginning in the next 12 months has declined to below 30%, down from a peak of 35% earlier in the year, said Satyam Panday, Chief US and Canada Economist at S&P Global Ratings. He also projects that the Federal Reserve will implement two more 25-basis-point rate cuts this year, one in October and another in December, as it shifts its focus towards supporting the labour market.Panday attributed the reduced recession risk to several factors. The initial fears surrounding trade tariffs have faded as businesses have adapted to the new environment, and some negotiated rates have been established. More significantly, he pointed to unexpectedly strong capital expenditure in the high-tech sector. “Just honestly, the capex numbers on high-tech have been really strong, surprising on the upside,” he said. This resilience has helped lower the recession probability from its mid-year high.

Despite the improved outlook, Panday cautioned that weaknesses persist in the US economy. He identified several “yellow flags,” including the labour market, consumer spending, and sentiment indicators, all of which remain below what would be considered healthy levels. It is this concern for the labour market that he believes is now guiding the Fed’s policy.

“The Fed is looking at the labour market very closely,” Panday stated. He argued that even though excess inflationary pressures still exist, the central bank is now weighing its employment mandate more heavily. “They don’t want the unemployment rate to move up further. And I think they are going to give that 25-basis point rate cut in their October meeting and perhaps again in December.”He clarified that these actions would represent a gradual easing cycle, not the sharp, aggressive cuts typical of a recessionary period. The moves are more about policy normalisation, or “tweaking around the edges,” to guide the policy rate back towards a neutral level, which he estimates to be between 3.1% and 3.3%.

For the entire interview, watch the accompanying video

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