Tesla CEO Elon Musk has said a recession is “inevitable at some point” and is most likely to happen in the near future, contradicting remarks by Biden administration officials who remain insistent that an economic downturn is not on the cards.
“A recession is inevitable at some point. As to whether there is a recession in the near term, that is more likely than not,” Musk said in an interview with Bloomberg News Editor-in-Chief John Micklethwait at the Qatar Economic Forum in Doha on Tuesday.
“It is not a certainty, but it appears more likely than not,” Musk said.
Musk’s comments are in stark contrast to those made by President Joe Biden, who last week told The Associated Press that a U.S. recession is not “inevitable,” while touting the nation as being in a “stronger position” than any other country in the world to overcome sky-rocketing inflation levels.
The U.S. annual inflation rate reached 8.6 percent in May, the highest level in 40 years, leaving American households facing greater costs for everything from food to fuel.
Experts now fear that a recession is inevitable, despite Federal Reserve chair Jay Powell’s hopes of achieving a “soft landing” in bringing inflation down.
Last week, the Fed raised the benchmark interest rate by 75 basis points; the largest rate hike since November 1994.
Meanwhile, Treasury Secretary Janet Yellen reiterated Biden’s stance on Sunday in an interview with ABC’s “This Week” during which she noted that high inflation would persist for the remainder of 2022 but insisted that a recession is not on the horizon.
“We’ve had high inflation so far this year, and that locks in higher inflation for the rest of the year,” Yellen said. “I expect the economy to slow. It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”
During Sunday’s interview, Yellen also pointed to savings cushions among American households which she said would allow for continued spending that could help bolster the economy.
“Even lower-income households continue to have buffer stocks of savings that will enable them to maintain spending,” Yellen said, adding that she does not see a “drop off in consumer spending as a likely cause of the recession in the months ahead.”
However, it is unclear just how many Americans actually have a savings buffer in place should the economy drastically weaken.
A survey by YouGov released Monday suggested that roughly half of Americans failed to build up savings during the COVID-19 pandemic, while just 53 percent of those who did had actually managed to hold onto them.
Separate data from Northwestern Mutual’s 2022 Planning & Progress Study showed that overall, savings levels among U.S. households remain high.
Yet with inflation costing Americans an estimated $635 extra each month, those savings could soon dwindle.
Elsewhere on Monday, billionaire Musk revealed that there are still a few “unresolved matters” with regards to his acquisition of Twitter, which seems to have stalled in recent weeks following a dispute over automated bots.
“We’re still awaiting resolution on that matter, and that is a very significant matter,” Musk said. “And then there is the question of, will the debt portion of the round come together and then will the shareholders vote in favor.”