The US will grow more slowly with higher inflation, Europe will flirt with recession and Russia will plunge into a deep, double-digit decline, according to forecasters.
The CNBC Rapid Update sees GDP rising by 3.2% this year, a slight decline from the February forecast, but still above-trend growth as the US continues to bounce back from the Omicron slowdown. Inflation for personal consumption expenditures is expected to rise by 4.3% this year, 0.7 percentage points higher than the previous survey in February.
The U.S. economy will respond to an oil shock that has seen crude prices surge quickly above $126 a barrel and the national average gasoline price over $4 per gallon. Higher inflation and lower growth are seen as risks to their forecasts.
Economists said a complete removal of Russian oil from the global supply could be a very bad outcome.
The consequences of a complete shut-off of Russia's 4.3 million barrels of oil exports to the US and Europe would be dramatic.
The CNBC Rapid Update shows the U.S. grew at a faster rate in the second quarter than in the first. The second quarter estimate is down from the previous survey. The economy is bouncing back from the omicron wave, but not as strongly as inflation.
Inflation estimates are higher for this quarter and next. Inflation is expected to decline by the end of the year.
The U.S. economy is seen enduring.
Energy prices are spiking, and they may remain higher persistently, but I expect much of the run-up seen in recent days to diminish within a few months, which means mainly a short-term impact on growth and inflation.
This price shock is different from others because of how much oil the U.S. produces. Money is transferred from consumers to producers inside the economy rather than from the U.S. to foreigners. It will hit individual American families harder, but boost the profits of U.S. energy companies.
Oil companies will likely use their profits to increase drilling.
The US is on the verge of a recessionary inflation, with energy and now food prices potentially soaring significantly further, according to Joseph.
The effect will be worse in Europe.
The growth forecast for Europe was marked down by the company.
The investment bank said that Europe was the most exposed region due to the high commodity prices and risk aversion in financial markets.
GDP is expected to increase by 3.2%, thanks to nearly a full percentage from European growth this year. The second quarter has been empty.
Russia is expected to get hit the hardest. The country's economy has been crippled by sanctions that have frozen its foreign exchange reserves and cut its economy off from the rest of the world.
The decline from the global financial crisis is double what the Institute for International Finance sees. The Chief Economist of the IIF wrote that Russia will never be the same again.
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