Benzinga - by Shanthi Rexaline, Benzinga Editor.
Recent economic data are pointing to a soft patch and reigniting recession talks. Noted economist David Rosenberg weighed in on the near-term trajectory of the economy.
What Happened: “We have had the biggest interest rate shock since 1981 if I'm not mistaken, 1981 was followed by 1982, which was not a mild recession by the way,” Rosenberg said on the Blockworks Macro podcast Thursday.
Part of the impact of that recession was blunted by the lingering impact of the fiscal stimulus, but that is now in the rear-view mirror, he said.
The economist noted that China is seemingly heading into some sort of a recession and has already entered into a structural slowdown. “It's exporting its deflation to the rest of the world,” he said.
“Then we are watching the central bankers just talk about higher for longer and about inflation,” Rosenberg said. Germany looks like it is on the precipice of another recession with obvious complications for all of Europe, he said.
“If we escape this little recession, it will be like a miracle,” Rosenberg added.
Why It's Important: Despite signals pointing to some softness, pricing data show inflation remains stubbornly high. Federal Reserve Chairman Jerome Powell and other Fed officials have continued to flag a “higher-for-longer” rate scenario until the inflation fight has been won.
Some economists argue that the lagging impact of the successive rate hikes has the potential to push the economy into a deflationary and recessionary situation. Meanwhile, others have seen the need for the Fed to revise its inflation target from the current 2% level.
Data released last week showed that the annual rate of the core consumer price inflation — the Fed's preferred inflation gauge came in at 4.2% in July — well above the current Fed target.
The iShares TIPS Bond ETF (NYSE:TIP), which tracks the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday’s session down 0.52% at $105.20, according to Benzinga Pro data.
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