The chances of a U.S. recession within 12 months has risen from 50 percent last month to 60 percent now, according to 42 economists responding in early October to Bloomberg’s monthly outlook survey.

A “significant tightening of financial conditions is a clear headwind to growth and comes at a time when consumer and business confidence is already under immense pressure from the rising cost of living and falling equity, bond, and real estate prices,” James Knightley, ING’s chief international economist, told Bloomberg.

Shopping, along with the jobs market, will fall victim to the Fed’s unrelenting campaign of interest rate increases, Bloomberg said.

The labor market will add less than 70,000 jobs in every quarter of 2023, the economists expect, with unemployment rising to 4.5 percent by the end of next year.

Business investment will decline for the next three quarters, respondents said, reversing last month’s prediction of increases.

Bloomberg Economics is even more pessimistic: its newest computer model of the U.S. economy guarantees a recession within 12 months, rating the probability at 100 percent.

The model weighs together 13 macroeconomic and financial indicators to predict the chance of a downturn from one month to two years ahead. 

The model shows a recession setting in within 12 months and also that the chance of a recession sooner than later has increased: the odds of a downturn striking within 11 months has risen from 30 percent to 73 percent, and within 10 months from zero to 25 percent.

TREND FORECAST: From Bloomberg’s survey of economists to its own economic model, signals show the approaching recession is picking up speed and is likely to set in sooner than 10 or 12 months from now.

Consumer spending, the U.S. economy’s all-important driver, is steadily slowing, as we report in “U.S. Businesses Warn of Weakening Consumer Demand, Fed Says” in this issue.

The housing industry also is slumping, which we noted in “Housing Crash Coming?” (4 Oct 2022) and in “Home Sales Plummet as Mortgage Rates Edge Up” in this issue. Home sales underpin a range of other industries, from construction to furniture and appliances to finance.

Falling home sales and penny-pinching consumers already are driving the economy toward a recession, which—barring an extraordinary event, such as lowering of interest rates which we forecast may become a reality or set of dramatically altered circumstances—is unavoidable.


U.S. businesses see a darkening future for the nation’s economy as inflation and interest rates continue to rise, according to the U.S. Federal Reserve’s “Beige Book” report, issued eight times a year.

Business executives voiced “growing concerns about weakening demand… attributed to higher interest rates, inflation, and supply disruptions,” the report said, although “declines in commodity, fuel, and freight costs were noted.”

The survey gathers anecdotal information from businesses across the Fed’s 12 regional districts and summarizes business outlook and sentiment.

Consumers increasingly are complaining or pushing back against high prices, many retailers reported.

In the Fed’s St. Louis region, restaurants and health care businesses reported being unable to pass higher costs through to customers and instead having to cut services or live on thinner margins.

However, businesses in the Kansas City district reported no grumbling from consumers when they raised prices.

Auto dealers in the Fed’s Cleveland district said potential buyers are balking at the higher monthly payments engendered by higher interest rates.

Real estate businesses across all Fed districts reported slowdowns because interest rates are rising. (See “Home Sales Plummet as Mortgage Rates Edge Up” in this issue.)

TREND FORECAST: American Express reports no drop in consumer spending and predicted consumers will spend freely over the winter holidays. 

However, American Express did not factor inflation into its view of consumer spending: shoppers may be laying out as many dollars, but those dollars buy 8.2 percent less stuff than they did a year earlier, thanks to inflation. 

In real terms, consumer spending is falling, a long-term trend that we have documented in “Retail Sales Fall in Real Terms in September” (18 Oct 2022), “Consumer Spending and Factory Orders Going Down” (5 Jul 2022), and “Consumer Spending Slows in February” (5 Apr 2022), among other articles.

As interest rates rise and inflation persists, consumers will eventually run out of savings or max out their credit cards and be forced to stop buying.

A majority of economists contacted by Bloomberg earlier this month lowered their estimates of consumer spending for every quarter next year and predicted nearly flat spending in 2023’s first two quarters.

Because consumer spending supports 70 percent of the U.S. economy, the holiday shopping season will be the bellwether. For many retailers, this crucial period determines a profit or loss for the year.

The outlook is grim. 

Retailers already are offering discounts to dump inventories bulging with unsold goods; many orders for the usual holiday stock have been canceled, as we reported in “Shipping Lines Cancel Cargo Voyages for Lack of Demand” (11 Oct 2022) and again in “Shipping Industry’s Slump Continues” in this issue.

With the Fed increasing interest rates again next week, trends are signaling a mediocre holiday shopping season at best.

Barring dramatic and unforeseen events, weak holiday spending will be the gateway to a full-blown U.S. recession. 


Over the last 12 months, prices for used cars soared as buyers confronting a scarcity of new cars bid up prices for second-hand models.

Now major banks are reporting that many of those loans are going bad.

Many of those buyers are wondering whether to keep making payments on a car worth less than they owe, which could be “challenging for the auto-finance sector going forward,” CEO Chris Gorman of lender KeyCorp said to Bloomberg.

Used-car prices fell 7 percent in this year’s third quarter, the steepest drop since the worst of the Great Recession, car auction company Manheim said. 

Wells Fargo has recently written off a higher percentage of loans overall, blaming loans for the purchase of used cars it made late last year. 

As the bank’s loss rate began to climb for newer loans, the bank tightened lending criteria. As a result, its new loans to car buyers plunged 40 percent in the last quarter, year over year.

Ally Financial, the U.S.’s second-largest auto lender, quadrupled the number of car loans it wrote off in this year’s third quarter. Fifth Third Bancorp has announced it will make fewer car loans.

“There has been a decline in used-car prices,” Fifth Third Chief Executive Officer Tim Spence, Fifth Third’s CEO, told Bloomberg. “That has caused us to throttle back on” car loans.

Ally’s rate of defective car loans may reach 1.6 percent next year, up from 1.05 percent in the quarter just ended, the company warned, but, unlike Fifth Third, Ally will keep lending.   

“We still feel good about new loans that we’re originating today,” Ally CEO Jeffrey Brown said in an interview with Bloomberg. 

“We constantly trim the margins where we see incremental pockets of risk,” he noted. “The analytics behind this are very robust [but] it’s a very fluid environment.”

Customers with troubled loans or weak credit ratings are working with lenders to try to keep their vehicles, Richard Stein, Fifth Third’s chief credit officer, said to Bloomberg.

“People, if they have a job, they want to keep their car – they don’t want to buy a new one,” he added. “They’re doing a lot of things to keep their car and to stay current or work through with the lenders.”

TRENDPOST: The rising number of delinquencies on major debts such as car loans or house payments is another signpost on the way to the coming recession. Again, the more people fired from their jobs, the higher the delinquency rates. 


Whirlpool, the world’s third-largest producer of washing machines, refrigerators, and other home appliances, cut its production by 35 percent in its most recent quarter as consumer demand buckled.

The company also cut in half its profits forecast for this year, saying that high costs and weak demand will persist into 2023.

“Demand is down and costs are up,” CEO Marc Bitzer said in a call with reporters.

“You would expect costs to come down in a recessionary environment,” he added, “but we’re operating in unprecedented times.”

The company’s third-quarter revenue also was crimped by the strong dollar when foreign sales in local currencies were converted into greenbacks, Bitzer noted.

That contributed to the period’s 70-percent drop in profits compared to the same quarter last year.

Sales in North America, Whirlpool’s largest market, slid 7.7 percent during the period, year on year, and profits from the region dove 49 percent.

The 35-percent cut in last quarter’s production cleared out $300 million in inventory, Bitzer said. The cut was equivalent to the one the company imposed at the beginning of the COVID War.

Whirlpool will have a chance to trim its materials costs in the second half of next year when supply contracts are renegotiated, Bitzer said.

Whirlpool’s revenue for this year will fall 9 percent short of last year’s to $20.1 billion, Bitzer predicted. 

TREND FORECAST: The more expensive the items, the less the consumers will purchase.  Moreover, appliance sales were artificially boosted when politicians locked down the nation, people were forced to stay in their homes and were given free COVID cash to artificially stimulate the economy. 

Therefore, the sales slump in this and other high cost retail sectors will continue to slump. 


In what is normally the year’s busiest season for international shippers, cargo lines are canceling sailings as overstocked retailers revoke orders for merchandise ahead of the holiday season.

Measured in 20-foot container equivalents, U.S. imports declined 11 percent year over year in September and 12.4 percent in August, according to the Descartes Datamyne data service.

Containers arriving in the U.S. from China in September were 18.4 percent fewer than in August, according to Descartes.

Deliveries into U.S. ports will decline 4 percent during the second half of 2022 compared to last, after expanding 5.5 percent in this year’s first six months, the Global Port Tracker data service reported in a study prepared for the National Retail Association.

“The growth in U.S. import volume has run out of steam,” Ben Hackett, author of the survey, told The Wall Street Journal

“Recent cuts in carrier shipping capacity reflect falling demand for merchandise from well-stocked retailers, even as consumers continue to spend,” he noted.

Shipping rates for containers have plunged from the 2021 record levels, although they are still above pre-COVID levels, as we reported in “Ocean Shipping Rates Have Sunk 60 Percent This Year” (13 Sep 2022).

The fall in imports is rippling through the rail industry, where intermodal shipments—those moving containers by rail, a mode favored by major retailers—dropped by 4.8 percent last month, year on year, and 5.4 percent from August, the Association of American Railroads reported. 

Demand for trucking services also has tumbled, taking freight rates down with it.

TRENDPOST: If goods are not being shipped to the U.S. now for the holiday shopping season, it is unlikely that new arrays of items will grace store shelves in December.

The lack of demand for ships carrying merchandise from manufacturing hubs to a primary center of consumption such as the U.S. adds evidence to forecasts that a recession is accelerating toward us. But again, it will be reversed when the Federal Reserve back-tracks on its interest rate hikes.

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