According to a survey of economists conducted by the National Association of Business Economics, 72% of economists expect the next US recession to begin by the middle of next year, if it hasn’t already started1. Steve Hanke, a professor of applied economics at Johns Hopkins University, believes that there is an 80% chance of the US falling into a recession2.

There are several key indicators that economists and analysts watch to predict the likelihood of a recession. Some of the most commonly cited indicators include:

1. The Yield Curve: An “inverted yield curve” is thought to be a harbinger of bad economic times1.

2. Gross Domestic Product (GDP): GDP is a measure of the financial value of all the goods and services produced by a country1.

3. Consumer Confidence: Consumer confidence can’t be emphasized enough as personal spending on goods and services makes up the bulk of economic activity2.

4. Payroll Employment Figures: As employment levels fall, it’s a signal of impending recession3.

5. Real Income: A secular decline in real income leads to a decline in overall economic activity2.

It’s important to note that no one indicator, or known combination of several indicators, provides an always-accurate prediction of when a recession will happen1.

According to the latest data from Bain & Company, inflation is generally declining, but economic headwinds persist globally1. The US 10-year minus 2-year Treasury yield spread has been inverted since July 2022, which is typically indicative of a recession within 12 months1. Inflation in the US nearly reached the heights of the early 1980s, peaking at 9.1% year over year (YOY) in June 2022, then falling to 3% in June 20231.