Wells Fargo Investment Institute said on Wednesday it reduced its economic expectations with a mild U.S. recession now on the horizon in its base case scenario for the end of 2022 and early 2023, making it one of the more bearish big U.S. banks.
Bank of America CorpRegister now for FREE unlimited access to Reuters.comWells Fargo's research arm also cut its year-end 2022 Gross Domestic Product growth target to 1.5% from 2.2% and cut its year-end 2023 target to a decline of 0.5% from its previous expectation for GDP growth of 0.4%.
It forecast a peak-to-trough contraction of 1.3% for three quarters. This would compare with the pandemic-induced 10% contraction in 2020, the 3.8% fall in the 2008-2009 financial crisis and the 0.1% dip in 2001 and the 1.4% drop in 1990/1991. While a first-quarter 2022 economic contraction was due primarily to strong imports and inventory changes, Wells Fargo noted that "consumer activity has weakened since then."
It cited the development of all three major risks identified in its December 2021 outlook including new COVID-19 outbreaks and restrictions, higher-for-longer inflation and a much stronger dollar. It said these issues were due to the Russia-Ukraine war and aggressive Federal Reserve policy.
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