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Experts are weighing the odds as to how likely a recession is and how fast it could come upon us.
Most Americans — 70% — already believe an economic downturn is on its way, according to a new survey from MagnifyMoney. The online survey was conducted between June 10 and 14 and included 2,082 respondents.
A recession is defined as a significant economic decline that lasts more than a few months.
The biggest recession warning sign, which 88% of respondents pointed to, is high inflation.
Respondents also reported seeing signs of an economic downturn in housing and rent prices, with 61%; rising interest rates, 56%; the stock market, 55%; declines in consumer spending, 42%; and rising unemployment, 36%.
Some of those perceptions may lean on how people feel about the economy, rather than hard numbers. While the U.S. economy still has bright spots — including a strong overall job market and rising wages — higher prices have raised Americans’ feelings of financial insecurity, according to Matt Schulz, chief credit analyst at LendingTree, which owns MagnifyMoney.
“When something as fundamental to people’s every day lives as gas prices and grocery bills goes sky high, it really has a huge impact on the way people look at things,” Schulz said.
New inflation data expected to be ‘highly elevated’
Forthcoming inflation data could further fuel consumer’s feelings of concern.
The Consumer Price Index, which measures the average change in prices over time for certain goods and services, climbed 8.6% in May from the previous year, the highest increase since 1981.
New data for June is slated to be released on Wednesday.
“We expect the headline number, which includes gas and food, to be highly elevated, mainly because gas prices were so elevated in June,” White House press secretary Karine Jean-Pierre said during a Monday press briefing.
However, those June numbers are already out of date because energy prices have since fallen substantially, she said.
“The President’s number one economic priority is tackling inflation,” Jean-Pierre said. “And looking ahead, there are a number of reasons why we expect those high prices to ease over the coming months.”
What people are doing to prepare for a recession
The biggest worry people citied about a looming recession is the inability to pay their bills, with 44%, according to the MagnifyMoney survey.
In order to prepare for a downturn, many are focused on keeping their spending in line — 62% of respondents said they are cutting back on spending, while 39% are sticking to a budget. Those steps can be important in the event of a job loss or other financial setback, experts say. Others are building emergency savings, with 26%.
MagnifyMoney respondents also reported taking steps to shore up their income streams, with 24% working a side gig and 6% improving job performance. Another 6% reported adjusting their investment portfolio.
Meanwhile, 11% of respondents said they are doing nothing.
Reducing debt can have a ‘significant’ effect
There are proactive steps individuals can take now to get themselves in a better financial position, according to Schulz.
One in 4 respondents in the MagnifyMoney survey reported paying down debt as a way to get their finances ready for an economic downturn. As the Federal Reserve raises interest rates, people may want to consider their options to control their personal interest rates on their debts, he said.
More from Personal Finance:
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5 steps you can take now to financially prepare for a recession
3 ways to deal with inflation, rising rates and your credit
For those with good credit, a 0% transfer credit card can by “very, very helpful,” Schulz said.
For those who don’t have good credit, a low interest personal loan may help reduce the interest you’re paying on your balances.
By calling the issuer for a current credit card, you may be able to negotiate a lower rate. That has worked for about 70% of people who have asked in the past year, according to Schulz.
“Any of those moves can reduce your rates significantly more than the amount that the Fed is raising them by on a monthly basis, so it can be a really significant thing,” Schulz said.