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- The US is in a rolling recession that's hitting sector by sector, Bank of America's Keith Banks said.
- Banks pointed to weakness in manufacturing, energy, and housing, though services remains strong.
- He predicted a mild recession to come in the first-half of 2024, with GDP slowing 1%-1.5%.
The recession Wall Street predicted to death is hitting the economy sector by sector rather than all at once – and that's slashed the risk of a sudden hard landing, according to Bank of America executive Keith Banks.
"We've got a $26 trillion economy that is basically made up of different sectors, operating at different speeds. So what we saw over the first half was a rolling recession in manufacturing, in energy, and in housing," Banks said in an interview with CNBC on Friday, pointing to economic weakness that stayed contained in those areas.
Housing activity has been on the decline over the past year as mortgage rates remain elevated. Energy prices have also slumped from highs last summer, and manufacturing activity dropped for the eighth-straight month in June, with the manufacturing PMI clocking at 46% last month – close to levels that have traditionally been associated with a recession.
Meanwhile, other areas of the economy have remained buoyant. The services sector was strong over the first half, as American consumers are still spending despite the gloomy economic backdrop. US GDP also expanded 2% in the first quarter.
Bank of America economists expect GDP to grow just 1.5% over the second quarter, before slowing down through the rest of the year. A mild recession will likely last for the first-half of 2024 as the rolling downturn spreads through other areas in the economy, Banks said, estimating a 1%-1.5% slowdown in GDP for the first and second quarters next year.
"Instead of having the balloon pop, there's been a slow letting out of the air," Banks said. "We think this sort of rolling recession has taken out that big-bang risk of a hard landing, which a lot of people were worried about at the beginning of this year," he later added.
Other commentators have turned more optimistic on the economy as the job market remains strong and inflation cools. The recession that was so widely forecasted last year may not come after all, some experts say, assuming the labor market holds up and inflation can be tamed without crushing demand.