Economist Gary Shilling Predicts High Risk of US Recession

Economist Gary Shilling warns that the United States faces a 60% to 70% chance of entering a recession or a period of stagflation within the next 12 months. Shilling points to a 0.6% decline in July retail sales, the worst monthly drop in nearly a year, and a personal savings rate that fell to 3% in July from over 9% in 2021.

Middle-income households are struggling with rising credit card debt, elevated energy costs, and a 12% increase in bankruptcy filings over the past year. The Federal Reserve System reported that consumer credit liabilities reached a record $5.1 trillion at the end of the first quarter. Shilling attributes these pressures to inflation spikes linked to the ongoing war in Iran and tariffs.

Market indicators show a shift toward discount retailers like Dollar Tree and Five Below, while mega-retailers face headwinds. Walmart experienced its slowest comparable sales growth in six years and saw its stock price drop 20% from its May peak. Additionally, the consumer sentiment gauge for August reported a decline.