Economist Forecasts Q1 Contraction, Suggests Recession Risks Remain Elevated

Negative GDP Growth More Likely Than Not in Q1, Economist Warns

A prominent economist is warning that a contraction in the US economy is more likely than not in the first quarter of this year, citing a combination of factors that could lead to a decline in gross domestic product (GDP).

According to a report by Bloomberg, economists at Citigroup, led by chief economist Andrew Kohli, have been warning clients that the likelihood of a negative GDP growth rate in Q1 is now higher than 50%. This is largely due to the ongoing impact of the pandemic on global supply chains, as well as the ongoing war in Ukraine, which has led to a surge in commodity prices and inflation.

The economists point to a range of factors that could contribute to a decline in GDP, including the ongoing shortage of semiconductors, which has led to a decline in car production and other affected industries. Additionally, the war in Ukraine has led to a surge in prices for key commodities such as wheat, corn, and soybeans, which could further exacerbate inflationary pressures.

Kohli and his team are not alone in their warnings about the potential for a negative GDP growth rate in Q1. Other economists, including those at Deutsche Bank and JPMorgan, have also been warning about the risks of a contraction in the US economy.

The warning comes as the US economy has been facing a range of challenges in recent months, including the ongoing impact of the pandemic, as well as the war in Ukraine, which has led to a surge in commodity prices and inflation. The Federal Reserve has been closely monitoring the situation and has already taken steps to tighten monetary policy in an effort to keep inflation in check.

While a contraction in GDP would be a significant development, it's worth noting that the US economy has been resilient in the face of previous challenges, including the pandemic. However, the ongoing uncertainty surrounding the war in Ukraine and the global supply chain could continue to pose risks to the economy in the coming months.