Recession less likely in U.S. as risk falls under 30%, says S&P economist

S&P’s Satyam Panday credits the improved outlook to businesses adapting to trade tariff disruptions and surprisingly strong capital investment in the high-tech sector, which has significantly contributed to lowering the recession risk from its mid-year peak

The likelihood of a U.S. recession in the next 12 months has fallen to under 30%, down from 35% earlier this year, according to Satyam Panday, Chief U.S. and Canada Economist at S&P Global Ratings.

Panday attributes the improved outlook to several stabilizing factors. Businesses have largely adjusted to the earlier disruptions caused by trade tariffs, and new negotiated rates have helped ease uncertainty. More notably, he highlighted a stronger-than-expected surge in capital investment, particularly in the high-tech sector, as a key driver behind the reduced recession risk.

“The capex numbers in high-tech have been surprisingly strong,” Panday said, noting that this resilience helped pull recession probabilities down from their mid-year peak.

Fed likely to cut rates further

Despite the more optimistic forecast, Panday warned that economic vulnerabilities remain. He pointed to ongoing concerns in the labour market, subdued consumer spending, and weak sentiment indicators — all of which remain below pre-pandemic norms.

As a result, he anticipates the Federal Reserve will deliver two additional 25-basis-point interest rate cuts — one in October and another in December — to bolster employment and stimulate growth.

“The Fed’s focus is clearly shifting towards supporting the labour market,” he added.

The outlook suggests a cautiously optimistic economic path, tempered by underlying risks.