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Mild Recession Scenario Being Considered in Forecasting of NA CV Markets

| June 14, 2022

With inflationary shocks emanating from Ukraine, the Fed’s task of engineering a soft landing has become increasingly challenging

According to ACT’s latest release of the North American Commercial Vehicle OUTLOOK, while ACT Research still believes a soft landing is the US economy’s most likely path, the potential for a mild recession is becoming an increasingly compelling alternative.

According to Kenny Vieth, ACT’s President and Senior Analyst, “We find ourselves in a turbulent environment, where still significant positive and increasingly negative economic forces are crashing into one another. With inflationary shocks emanating from Ukraine, the Fed’s task of engineering a soft landing has become increasingly challenging.” He continued, “We believe downward pressures are building, and the probability of recession continues to grow. We think the probability of a mild recession is now nearly as likely as that of our base-case scenario.”

Vieth concluded, “With the current head of steam that includes healthy consumer and business balance sheets, strong employment demand, and pent-up manufacturing sector activity, this inflation driven economic slowdown is on one hand somewhat unique. On the other, traditional recession predictors are in play: Fed rate hikes, high energy prices, negative exogenous events and falling equity valuations come to mind.” Vieth noted, “We believe the odds of a recession materializing, in some form or fashion, are essentially 50/50 relative to our slowing topline growth into a modest freight recession base case.”

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