Ma­jor­ity of econ­o­mists see re­ces­sion on the hori­zon

The Morning Call - - BUSINESS CYCLE - By Marcy Gor­don

WASH­ING­TON — A strong ma­jor­ity, 74%, of U.S. busi­ness econ­o­mists ap­pear suf­fi­ciently con­cerned about the risks of some of Pres­i­dent Don­ald Trump’s eco­nomic poli­cies that they ex­pect a re­ces­sion in the U.S. by the end of 2021.

The econ­o­mists sur­veyed by the Na­tional As­so­ci­a­tion for Busi­ness Eco­nomics, in a re­port re­leased Mon­day, mostly didn’t share Trump’s op­ti­mistic outlook for the econ­omy, though they generally saw re­ces­sion com­ing later than they did in a sur­vey taken in Fe­bru­ary. Thir­ty­four per­cent of the econ­o­mists sur­veyed said they be­lieve a slow­ing econ­omy will tip into re­ces­sion in 2021. That’s up from 25% in the Fe­bru­ary sur­vey.

An ad­di­tional 38% of those polled pre­dicted that re­ces­sion will oc­cur next year, down slightly from 42% in Fe­bru­ary. An­other 2% of those polled ex­pect a re­ces­sion to be­gin this year.

In Fe­bru­ary, 77% of the econ­o­mists ex­pected a re­ces­sion ei­ther this year, next year or in 2021.

A strong econ­omy is key to the Repub­li­can pres­i­dent’s 2020 re­elec­tion prospects. Con­sumer con­fi­dence has dropped 6.4% since July.

Trump has dis­missed con­cerns about a re­ces­sion, of­fer­ing an op­ti­mistic outlook for the econ­omy af­ter last week’s steep drop in the fi­nan­cial mar­kets. He said Sun­day, “I don’t think we’re hav­ing a re­ces­sion. We’re doing tremen­dously well. Our consumers are rich. I gave a tremen­dous tax cut and they’re loaded up with money.”

Still, Trump on Mon­day called on the Fed­eral Re­serve to cut in­ter­est rates by at least a full per­cent­age point “over a fairly short pe­riod of time,” say­ing that would make the U.S. econ­omy even bet­ter and would quickly boost the flag­ging global econ­omy.

In two tweets, Trump kept up his pres­sure on the po­lit­i­cally in­de­pen­dent Fed and its chair­man Jerome Pow­ell, whom he chose to lead the Fed, as­sert­ing the U.S. econ­omy was strong “de­spite the hor­ren­dous lack of vi­sion by Jay Pow­ell and the Fed.”

While the econ­o­mists in the NABE sur­vey generally saw re­ces­sion com­ing later than they had in Fe­bru­ary, the lat­est sur­vey was taken be­tween July 14 and Aug. 1 — be­fore the fi­nan­cial mar­kets last week sig­naled the pos­si­bil­ity of a U.S. re­ces­sion, send­ing the Dow Jones In­dus­trial Aver­age into its big­gest one-day drop of the year. Stock mar­kets around the world shud­dered as the White House an­nounced 10% tar­iffs on an 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.

The 226 econ­o­mists re­spond­ing work mainly for cor­po­ra­tions and trade as­so­ci­a­tions.

The econ­o­mists 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.

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