Bloomberg highlights factors that prevent US economy from achieving soft landing

Amid strong headwinds, the US economy is facing high inflation rates, accompanied by raising interest rates and tightening credit standards, but the economy is still resilient and has not entered a recession, which is what all central banks seek when they fight inflation.However, Bloomberg News believes that despite the possibility of a soft landing, there are a group of factors that, when combined, prevent the US economy from achieving such a decline.In a report, Bloomberg said that that there is uncomfortable lesson for the US from recent economic history, which is that when everyone expects a soft landing, brace for impact.It pointed out that the current summer saw a decline in inflation while jobs remained plentiful and consumers kept spending, which bolstered confidence, especially at the Federal Reserve, that the worlds biggest economy will avoid recession.However, the report said that there are factors that could easily shave a percentage point off GDP growth in the fourth quarter this year. A decline in GDP over two consecutive quarters leads to economic recession.In a growing economy, a country's citizens become richer on average as the value of the goods and services they produce, GDP, increases. Sometimes this value decreases, and a recession is usually determined when this occurs for two, three-month periods in a row. This is usually a sign that the economy is doing poorly.Bloomberg explained that the last-minute deal to avoid a government shutdown kicks one immediate risk a little further into the future, with the possibility of the closure returning after the expiration of the temporary spending agreement, which would affect the GDP.Other factors that could easily shave a percentage point off GDP growth include the major auto strike and the resumption of student-loan repayments, in addition to the dwindling pandemic savings, the soaring interest rates and now oil prices too. The combined impact could be enough to tip the US into a downturn as early as this year.Bloomberg gave an example of the incorrect expectations that economists make, especially with regard to recession, noting that in October of 2007, San Francisco Fed President Janet Yellen said just two months before the Great Recession began, "the most likely outcome is that the economy will move forward toward a soft landing." Yellen wasnt alone in her optimism.The report attributed the mistake that specialists make regarding recessions to the fact they assume that what happens next in the economy will be some kind of extension of whats already happened- a linear process. But recessions are non-linear events, and the human mind isnt good at thinking about them, Bloomberg explained.It stressed that history and data indicate that the consensus has gotten a little too complacent just as it did before every US downturn of the past four decades.Soft-landing optimists note that stocks have had a good year, manufacturing is bottoming out and housing reaccelerating. The problem is the full force of the Fed's hikes- 525 basis points since early 2022- won't be felt until the end of this year or early 2024. When that happens, it will provide a fresh impetus for stocks and housing to turn down. Its premature to say the economy has weathered that storm, Bloomberg said.Federal Reserve officials indicated at the end of last September that they were ready to raise interest rates again this year to combat inflation, after they decided to keep interest rates fixed at their highest level in 22 years in the range of 5.25 to 5.5 percent. These statements resonated among investors in the US financial markets, which had a negative impact on stocks and bonds.Bloomberg concluded its report by saying that a soft landing remains possible. However, it did not think so with the US confronting the combined impact of Fed hikes, auto strikes, student loan repayments, higher oil prices, and global slowdown.