Survey of Economists Sees Recession Odds Higher for 2021 Than 2020

The National Association for Business Economics (NABE) releases monthly data that is used to forecast expected strength or weakness in the economy in the near future. Despite the media being blatantly wrong in recent months with its warnings of an imminent recession, people who actually forecast the business economy and who run companies see the recovery continuing. The NABE’s panel currently expects slower growth in 2020, but it sees no recession despite the notion that downside risks outweigh the upside ones.

The NABE’s latest survey of 53 forecasters sees the 2.9% gross domestic product growth of 2018 slowing to an expected 2.3% for 2019 and 2020 GDP growth is now projected to slow to 1.8%. This is unchanged from the October survey. The current forecast has a recession having started in 2019 as just 5%, rising to 21% at some point during the first half of 2020 and as much as 43% by the end of 2020. The current odds are 66% for a recession to begin by mid-2021, while the odds of a recession beginning after mid-2021 were seen at 34%.

While the trade war with China and strained relations with other trading partners persist, about half of those surveyed see trade tensions being the top economic risk in 2020. Over 80% of the respondents lowered baseline 2019 and 2020 growth expectations in light of trade policy developments.

Another issue is that only a handful of economists were still expecting a rate cut in December, but those who were surveyed appear dividend over the next Federal Reserve rate actions in 2020. Consumer spending is currently projected to rise by 2.6% in 2019 and is expected to slow to 2.4% growth in 2020. The median forecast for jobs is signaling a 3.7% unemployment rate on average in 2020, identical to the projection for 2019.

The following are quotes taken directly from the survey.

NABE President Constance Hunter (of KPMG) said:

The consensus forecast calls for a pickup in housing, but slower growth in business investment and consumer spending, along with larger deficits in trade and the federal budget.

Survey Chair Eugenio Aleman (of Wells Fargo) said:

The panel is split regarding when the next recession will begin. Respondents believe the odds that GDP will first turn downward by mid-2020 are about one out of five, but indicate there is a one-third chance that the downturn will not begin until the second half of 2021 or later… Seventy-one percent of panelists believe that the balance of risks is to the downside. Panelists consider trade policy to be both the greatest downside and upside risk to the U.S. economy through 2020. Consumer prices are expected to increase 1.8% in 2019 and 2.0% in 2020, less than in 2018. Furthermore, panelists expect the Federal Reserve to keep interest rates unchanged in 2020.

More details can be found on the survey’s press release.

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