US economists cut 2019 growth forecasts

Pedestrians in midtown Manhattan, in New York City. The panellists see wage growth as the biggest upside risk to the US economy, despite an expected increase of just 3 per cent this year, as inflation holds right around the Fed's 2 per cent target.
Pedestrians in midtown Manhattan, in New York City. The panellists see wage growth as the biggest upside risk to the US economy, despite an expected increase of just 3 per cent this year, as inflation holds right around the Fed's 2 per cent target.PHOTO: AGENCE FRANCE-PRESSE

WASHINGTON • US economists are less optimistic about the outlook and sharply lowered their growth forecasts for this year, amid slowing global growth and continued trade frictions, according to a survey published yesterday.

And while the odds of a recession by 2020 remain low, they are rising, the National Association for Business Economics (Nabe) said in its quarterly report.

The panel of 55 economists now believe "the US economy has reached an inflection point", said Nabe president Kevin Swift.

The consensus forecast for real gross domestic product growth was cut by three-tenths from the December survey, to 2.4 per cent, after a 2.9 per cent expansion last year. The economy is expected to slow further next year, with growth of just 2 per cent, the report said.

Three-quarters of respondents cut their GDP forecasts and believe risks to the economy are weighted to the downside.

"A majority of panellists sees external headwinds from trade policy and slower global growth as the primary downside risks to growth," Nabe survey chairman Gregory Daco said in a statement. "Nonetheless, recession risks are still perceived to be low in the near term."

Panellists put the odds of a recession starting this year at around 20 per cent and next year at 35 per cent, slightly higher than in December.

Mr Daco said that "reflects the Federal Reserve's dovish policy U-turn in January", when the central bank said it would keep interest rates where they are for the foreseeable future, a message reinforced this week. After four rate increases last year, said Mr Daco, a "near-majority of panellists anticipates only one more interest rate hike in this cycle compared to the three hikes forecast in the December survey".

  • 2.4%

  • Estimated growth of the economy, which is expected to slow further next year, according to the National Association for Business Economics' quarterly report.

Panellists see wage growth as the biggest upside risk to the economy, despite an expected increase of just 3 per cent this year, as inflation holds right around the Fed's 2 per cent target.

Meanwhile, amid President Donald Trump's aggressive tariff policies, the panel projects trade deficit will rise to a record US$978 billion (S$1.3 trillion) this year, beating last year's record US$914 billion.

In an interesting twist in the survey, only 20 per cent said they expected to see the dreaded "inverted yield curve" - when the interest rate on the 10-year Treasury note falls below the three-month bill - this year. In fact, the yield curve inverted on Friday for the first time since 2007.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 26, 2019, with the headline 'US economists cut 2019 growth forecasts'. Print Edition | Subscribe