Recession Possible in 2020: Business Economists

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The U.S. economy is poised to grow through the end of next year thanks to tax cuts enacted last December. Things get a little dicier after that.

That’s the view published Monday by the National Association of Business Economists (NABE) in their June 2018 Outlook. Half of the group’s panel of economists expects the next recession to show up between the fourth quarter of 2019 and the second quarter of 2020. Another third project a recession after the fourth quarter of 2020.

Economic growth measured by real gross domestic product for 2018 is projected to drop from 2.9% in the previous survey to 2.8% while the growth forecast for 2019 remains at 2.5%. Real GDP grew by 2.3% in 2017.

NAVE survey analyst Steven Cochrane of Moody’s said:

In large part, the growth prospects appear to be related to federal fiscal policies. The median estimate of the impact on real GDP growth resulting from fiscal policy changes is an increase of 0.4 percentage points in 2018 and 0.3 percentage points in 2019, but nearly 76% of respondents believe that current trade policies will have a negative effect. The panelists’ views about the onset of the next recession are mixed, with 82% believing it will start after 2019.

Yelena Shulyatyeva, NABE survey analyst and senior U.S. economist at Bloomberg, added:

The outlook for inflation remains modest but expectations are rising. Overall, panelists expect that inflation, as measured by the personal consumption expenditures (PCE) price index, will increase 2.1% from the fourth quarter of 2017 to the fourth quarter of 2018, up from the 1.9% expected in the previous survey. The Q4/Q4 median inflation forecast for 2019 is also higher, at 2.1%.

More than half of the economists (57%) say that the balance of risks to real GDP growth through 2019 is weighted to the downside. In the March Outlook, 75% of the business economists believed risks were weighted to the upside. The difference is that the earlier projection focused on the tax cuts and near-term fiscal policy while the June Outlook is “dominated by tariffs and potential trade wars.”