Gary Shilling predicts 60-70% recession chance in 12 months

Legendary economist Gary Shilling says there’s a 60% to 70% chance the U.S. will slide into recession within the next 12 months, flagging weakening consumer signals as the clearest warning sign.

Shilling, who has been tracking U.S. economic cycles for decades, points to a mix of rising credit card delinquencies, falling retail sales, and a pullback in discretionary spending—especially among lower- and middle-income households—as evidence that household resilience is cracking. He notes that Americans have been propping up the economy by dipping into savings and taking on more debt since wage growth slowed in late 2023. With inflation still eating into purchasing power and job market cooling, he sees little buffer left for consumers to keep spending at current levels.

Consumer spending drives about 70% of U.S. GDP. When households pull back, businesses cut jobs and investment, which can trigger a self-reinforcing downturn. Recent data from the Federal Reserve shows credit card delinquencies at their highest since 2011, while retail sales fell 0.6% in February, the second straight monthly decline. Shilling also highlights that the personal savings rate has dropped below 4%, a level last seen before the 2008 financial crisis. He warns that if unemployment begins to rise, even modestly, consumer confidence could collapse, accelerating the downturn.

What happens next may depend on Federal Reserve policy. Markets expect interest rate cuts by mid-year, but Shilling argues that monetary easing alone won’t fix structural imbalances like high household debt and weak wage growth. He sees a hard landing as likely unless wage growth accelerates or energy prices fall sharply. For now, businesses and policymakers are watching the same signals Shilling is—credit trends, retail data, and consumer sentiment reports—to gauge whether the economy is truly on the brink.