US economists foresee recession in 2020 or 2021: survey

24 Aug '19

2 min read

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Most economists expect a recession to hit the United States in the next two years, but have pushed back the onset amid Federal Reserve actions, according to a recent survey by the National Association for Business Economists (NABE), which found far fewer experts now think the next recession will start this year compared to a survey in February.

However, the Fed was already sending strong signals that it intended to pull back on the rate increases made in 2018 due to concerns starting to dog the economic outlook, including the trade war with China.

A mere two per cent of the 226 respondents now see a recession this year, compared to 10 per cent in February's survey, NABE said.

Survey respondents indicate the expansion will be extended by the shift in monetary policy, said NABE president Constance Hunter, who is the chief economist at KPMG.

However, the panel is split on whether the downturn will hit in 2020 or 2021, Hunter said in a summary of the survey, which showed 38 per cent expect a contraction of growth next year, while 34 per cent don't see it until the following year.

More economists shifted their recession prediction to 2021, narrowing the gap from the prior report, which had many more expecting the change next year.

The results show 46 per cent expect at least one more rate cut this year from the Fed, while about a third see policy holding where it is now, with 2.25 per cent as the top end of the policy range.

Economists are skeptical about a resolution to Trump's trade wars, although 64 per cent said a ‘superficial agreement is possible’, NABE said.

As Trump continues his vocal campaign criticizing the Fed, the NABE survey found economists are concerned about the impact: 55 per cent said his remarks do not influence Fed decisions but do ‘compromise the public's trust in the central bank’.

And over a quarter of respondents said the criticism will ‘cause the Fed to be more dovish than otherwise, thus threatening its independence’.

On fiscal policy, a majority of economists said Trump's tax cuts ‘had an overall negative impact on housing activity over the past 18 months’, due to changes in deductions allowed for mortgage interest. (DS)

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