US economists expect recession in 2020 or 2021: Survey

Only 2 per cent of 226 respondents in a poll by the National Association for Business Economists now see a recession in the US this year, compared with 10 per cent in February's survey.
Only 2 per cent of 226 respondents in a poll by the National Association for Business Economists now see a recession in the US this year, compared with 10 per cent in February's survey.PHOTO: AGENCE FRANCE-PRESSE

WASHINGTON • A majority of economists expect a US recession in the next two years, but have pushed back the onset amid Federal Reserve actions, according to a survey released yesterday.

The National Association for Business Economists (Nabe) found far fewer experts now think the next recession will start this year compared with a survey in February.

Nabe conducted its policy poll as US President Donald Trump put the Fed under constant attack, demanding more stimulus, but before the central bank cut the benchmark lending rate on July 31.

However, the Fed was already sending strong signals that it intended to pull back on the rate increases made last year due to concerns starting to dog the economic outlook, including the trade war with China. "Survey respondents indicate that the expansion will be extended by the shift in monetary policy," said Nabe president Constance Hunter, who is chief economist at KPMG.

Only 2 per cent of the 226 respondents now see a recession this year, compared with 10 per cent in February's survey, Nabe said.

However, "the panel is split regarding whether the downturn will hit in 2020 or 2021", Ms Hunter said in a summary of the survey, which showed 38 per cent expect a contraction of growth next year, while 34 per cent do not 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 also sceptical about a resolution to Mr Trump's trade wars, although 64 per cent said a "superficial agreement is possible", according to Nabe.

But that was before Mr Trump announced another round of tariffs of 10 per cent on the remaining US$300 billion (S$415 billion) in products from China not yet hit by US punitive duties. The new measures will take effect in two stages - on Sept 1 and Dec 15.

And as Mr Trump continues his vocal campaign criticising the Fed, the Nabe survey found economists are concerned about the impact: 55 per cent said Mr Trump's remarks do not influence Fed decisions but do "compromise the public's trust in the central bank".

  • 38% Of experts polled expect the US economy to shrink next year, while 34 per cent expect it to happen in 2021.

    46% Of experts polled foresee one more rate cut from the Fed this year.

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

The survey also asked about fiscal policy, and a majority of economists said Mr 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.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on August 20, 2019, with the headline 'US economists expect recession in 2020 or 2021: Survey'. Print Edition | Subscribe