According to a recent report by The Wall Street Journal, an overwhelming majority of economists predict that a second Trump administration would lead to higher inflation, deficits, and interest rates compared to a continuation of Biden's presidency.
The Wall Street Journal's findings are based on a quarterly survey conducted between July 5 and 9, which gathered responses from 68 professional forecasters across business, Wall Street, and academia.
"Of the 50 respondents who answered questions regarding Trump and Biden, 56% indicated that inflation would be higher under another Trump term compared to a Biden term," stated the WSJ. In contrast, only 16% believed inflation would be lower under Trump, while the remaining respondents saw no significant difference.
The article explains that economists' views on inflation and interest rates are largely influenced by Trump's policy preferences, particularly in areas such as trade and immigration.
Moreover, analysts at the Economic Outlook Group articulated to the WSJ that the risk of inflation reaccelerating is substantial in a Trump presidency.
The WSJ further reports that, on average, economists predict U.S. gross domestic product (GDP) growth of 1.7% this year, following the latest inflation data. This is a decline from the 3.1% growth observed in 2023 (measured from the fourth quarter compared to the previous year).
Additionally, economists forecast that unemployment will slightly exceed 4% through 2026, with monthly payroll expansion averaging around 131,000 jobs over the next year.
On average, the probability of a recession within the next 12 months is estimated at 28%, a figure that has remained relatively unchanged since the last survey conducted in April.
Breaking Down the Numbers: How This Affects You
Let's simplify this for everyone:
- Inflation: If Trump gets another term, prices for goods and services are likely to rise more than if Biden stays in office.
- Interest Rates: Higher inflation usually means higher interest rates, making loans and mortgages more expensive.
- Job Market: While jobs will continue to grow, the unemployment rate will hover just above 4% for the next few years.
- Economic Growth: The GDP growth is expected to slow down from 3.1% to 1.7%, indicating a weaker economy.
- Recession Risk: There's a 28% chance of a recession over the next year, a figure that hasn't changed much recently.
Impact on Your Finances:
If inflation rises under Trump, your everyday costs will increase. Higher interest rates will make borrowing more expensive, affecting everything from credit cards to home loans. While job growth remains steady, the economy won't grow as fast, which could impact wages and job stability. Lastly, the threat of a recession means you should consider being more cautious with your investments and savings.