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34% of economists expect a recession in 2021

Trump & advisers try to defuse recession fears
  • 38% of economists surveyed by the National Association for Business Economics expect a recession in 2020 -- down from 42% in an earlier survey.
  • The upshot: Only 2% of those polled expect a recession to start this year.
  • Economists polled by NABE expressed concern that U.S. tariffs on China and other countries, as a well as higher federal budget deficits, could hurt economic growth.

A growing share of U.S. business economists think a recession is unlikely before 2021.

In a report on Monday, 38% of economists surveyed by the National Association for Business Economics said they believe a slowing economy will tip into recession in 2020. That's down from 42% in a survey taken in February. Only 2% of those polled expect a recession to begin this year, while roughly a third of respondents foresee one hitting in 2021.

One reason fewer economists expect a recession next year—the Federal Reserve's move last month to dial back interest rates for the first time since 2008. Many forecasters and investors predict the central bank will further ease monetary policy over the rest of the year.

President Donald Trump has dismissed concerns about a recession, offering an optimistic outlook for the economy, saying on Sunday, "I don't think we're having a recession." A strong economy is key to the Republican president's 2020 reelection prospects.

Economists polled by NABE have previously expressed concern that Trump's tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key U.S. trading partners, from China and Europe to Mexico and Canada. Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But U.S. trading partners have simply retaliated with tariffs of their own.

Little hope for a trade deal

Trade between the U.S. and China, the two biggest global economies, has plunged. Mr. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60% of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the U.S. buys from China.

The financial markets last week signaled the possibility of a U.S. recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

Economists worry Trump's trade war with China could slow economic growth

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of U.S.-China trade negotiations. Only 5% predicted that a comprehensive trade deal would result, 64% suggested a superficial agreement was possible and nearly 25% expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10% tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

Resilient economy

As a whole, the business economists' recent responses have represented a rebuke of the Trump administration's overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. U.S. retail sales figures out last Thursday showed that they jumped in July by the most in four months.

The survey showed a steep decline in the percentage of economists who found the $1.5 trillion in tax cuts over the next decade "too stimulative" and likely to produce higher budget deficits that should be reduced, to 51% currently from 71% in August 2018.

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