The sky will fall, economically speaking, on that most economists agree.
Where they do differ, is when exactly they expect America’s economy to suffer two straight quarters of negative economic activity and what factors may lead up to a future recession.
In the latest survey from the National Association for Business Economics, 281 members reported their economic predictions.
“Three-fourths of the NABE Policy Survey panelists expect an economic recession by the end of 2021,” said NABE President Kevin Swift, CBE, chief economist at the American Chemistry Council. “While only 10% of panelists expect a recession in 2019, 42% say a recession will happen in 2020, and 25% expect one in 2021.”
The results of the survey cloud up the crystal ball even further, as most experts disagree on recession calls. First American Chief Economist Mark Fleming recently predicted a recession in this short video interview — but that’s not what Goldman Sachs is predicting. Furthermore, there’s a 25% chance of a recession in the next 12 months, according to a new Reuters poll of economists.
The NABE survey adds that business economists still generally approve of current monetary policy. Moreover, they say that the current deregulatory environment and tax policies from the Trump administration are providing an economic boost, but expect that influence to wane going into the second half of the president’s first term. The economists are in opposition to the Federal Open Market Committee’s stand on interest rate hikes.
“There is a schism between what the NABE panel and the markets think about the Fed’s rate path and the shrinking of its balance sheet,” said Survey Chair Megan Greene, global chief economist at Manulife Asset Management. “The markets are pricing in no more interest-rate hikes in 2019, whereas a majority of the NABE panel expects one or two rate hikes this year. Survey results also reveal that, while investors have frequently blamed higher borrowing costs on the Fed’s quantitative tightening, the panel is inconclusive regarding the impact of shrinking the Fed’s balance sheet on short- and long-term rates.”
65% of respondents expect the upper end of the federal funds target range at year-end 2019 will be 2.75% (39% of respondents) or 3% (26% of respondents), compared to the current level of 2.5%.
However, panelists are in far less agreement about the outlook for rate hikes in 2020.
Expectations for the upper end of the federal funds target rate range from the current 2.5% (17% of respondents) to 2.75% (11%), 3% (23%), and 3.25% (17%). Another 15% of respondents expect the target rate will be below the current rate at the end of 2020.