‘Everything Points to Relatively Mild Recession’ in 2023: Bank of America CEO

Bank of America CEO Brian Moynihan in Glasgow, Scotland, on Nov. 3, 2021. (Ian Forsyth/Getty Images)

The chief executive of Bank of America (BofA) is expecting a recession to hit the United States this year, with GDP growth projected to fall for three consecutive quarters.

U.S. GDP is estimated to contract by 0.5–1.0 percent for the upcoming three quarters before growth turns positive, BofA CEO Brian Moynihan said during the bank’s quarterly earnings call on April 18. “Everything points to relatively mild recession, given the amount of stimulus that was put—that was paid [to] the people and the money they have leftover, the fact that unemployment is still at 3.5 percent,” he said.

“And then the wage growth is slowing in tipping over, so the size of inflation are tipping down, but they’re still there, but that translates into good—relatively good activity. So we see it as a slight recession and we'll see what happens.”

“We don’t see activity on the consumer side slowing at a pace that would indicate that [recession], but we see commercial customers are being more careful,” he added.

The Federal Reserve had approved nine consecutive interest-rate hikes, which pushed benchmark federal funds rate from 0.25 percent a year back to a range of 4.75–5.0 percent.

The upcoming Fed meeting is set for May, with the central bank open to a tenth bout of rate hikes, despite the economic slowdown and the ongoing banking crisis triggered by the collapse of Silicon Valley Bank (SVB).

Recession Probability

Nonprofit think-tank The Conference Board sees the probability of a U.S. recession as “elevated.” The organization’s probability model predicts a 99 percent likelihood of a recession in the country over the next 12 months, according to a post on April 12.

“This is consistent with our view that economic weakness will intensify and spread more widely throughout the U.S. economy over the coming months, leading to a recession starting in mid-2023,” it said, while predicting GDP growth to contract for three consecutive quarters beginning second quarter 2023.

“Despite better-than-expected consumer spending recently, the Federal Reserve’s interest rate hikes and tightening monetary policy will lead to a recession in 2023.”

The U.S. economy registered positive economic growth in the last two quarters of 2022 following negative growth in the first two quarters. However, fourth-quarter growth was slower than thrid-quarter growth.

Moreover, the GDP increase for 2022 only came in at 2.1 percent, down by over half from the 5.9 percent in the previous year.

Corporate Default, Fed Admitting Recession

Experts are foreseeing corporate defaults to rise in the United States. In the Credit Outlook survey conducted by the International Association of Credit Portfolio Managers (IACPM), 86 percent of respondents stated that defaults will rise over the next 12 months.

“Our members have expected to see the impact of rising interest rates for some time, and we’re beginning to see more credit stress and defaults in corporate borrowers now,” said Som-lok Leung, executive director of the IACPM.

Among respondents, 84 percent foresee a recession to hit the country in 2023, with sectors like health care, defense manufacturers, transportation firms like trucking companies, and medium-sized tech firms being more vulnerable to current market conditions.

The Federal Reserve minutes (pdf) from the March policy meeting stated that “the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.”

In an interview with The Epoch Times, Mike “Mish” Shedlock, author of the “MishTalk” economics blog, pointed out that Fed members do not use words like “recession” lightly. In the previous months, members had shied away from using the word despite stress in the financial system and rising unemployment.

“They didn’t use the word ‘recession’ then,” he said. “Well, they’re using the word ‘recession’ now. That kind of ties everything together here.”