A majority of economists expect a US recession in the next two years, but have pushed back the onset amid Federal Reserve actions, according to a survey released on Monday.
The survey came out after President Donald Trump pushed back against talk of a looming recession as a raft of US data reports last week showed a mixed picture on the economy.
“I’m prepared for everything. I don’t think we’re having a recession. We’re doing tremendously well. Our consumers are rich,” Trump told reporters on Sunday. “I gave a tremendous tax cut, and they’re loaded up with money. They’re buying. I saw the Wal-Mart numbers, they were through the roof.
“And most economists actually say that we’re not going to have a recession. But the rest of the world is not doing well like we’re doing.”
His chief economic advisor Larry Kudlow also downplayed talk of a recession.
“I sure don’t see a recession,” he told NBC’s Meet the Press.
“Consumers are working at higher wages. They are spending at a rapid pace. They’re actually saving also while they’re spending […] So I think actually the second half, the economy’s going to be very good in 2019,” he said.
“We’re doing pretty darn well in my judgment. Let’s not be afraid of optimism.”
The National Association for Business Economists (Nabe) found that far fewer experts now think the next recession will start this year, compared to a survey in February.
Nabe conducted its policy poll as Trump put the Fed under constant attack, demanding more stimulus, but before the central bank cut the benchmark lending rate on July 31.
However, the Fed was already sending strong signals that it intended to pull back on the rate increases made in 2018 due to concerns starting to dog the economic outlook, including the trade war with China.
Trade war skepticism
“Survey respondents indicate that the expansion will be extended by the shift in monetary policy,” said Nabe president Constance Hunter, who is chief economist at KPMG.
Only two percent of the 226 respondents now see a recession this year, compared to 10 percent in February’s survey, Nabe said.
However, “the panel is split regarding whether the downturn will hit in 2020 or 2021,” Hunter said in a summary of the survey, which showed 38 percent expect a contraction of growth next year, while 34 percent don’t see it until the following year.
More economists shifted their recession prediction to 2021, narrowing the gap from the prior report, which had many more expecting the change next year.
The results show 46 percent expect at least one more rate cut this year from the Fed, while about a third see policy holding where it is now, with 2.25 percent as the top end of the policy range.
Economists are skeptical about a resolution to Trump’s trade wars, although 64 percent said a “superficial agreement is possible,” Nabe said.
But that was before Trump announced another round of tariffs of 10 percent on the remaining $300 billion in goods not yet hit by US punitive duties. The new measures will take effect in two stages, on September 1 and December 15.
As Trump continues his vocal campaign criticizing the Fed, the Nabe survey found economists are concerned about the impact: 55 percent said his remarks do not influence Fed decisions but do “compromise the public’s trust in the central bank.”
And over a quarter of respondents said the criticism will “cause the Fed to be more dovish than otherwise, thus threatening its independence.”
The survey also asked about fiscal policy, and a majority of economists said Trump’s tax cuts “had an overall negative impact on housing activity over the past 18 months,” due to changes in deductions allowed for mortgage interest.