Tue, Sep 26, 2017 - Page 10 News List

US economists see growth slowdown and rate increase by end of the year

AFP, NEW YORK

Amid uncertainty over US President Donald Trump’s growth agenda, US economists increasingly worry about risks to the economy, although they see little chance of a recession in the near term, according to a survey released yesterday.

The National Association for Business Economists’ quarterly survey showed little change in the forecasts compared with June in key areas such as economic growth, which was projected at 2.2 percent in this year and 2.4 percent next year.

However, the September survey of about 50 economists showed that 48 percent believed the risks to the economy are weighted to the downside, indicating chances for an economic slowdown, while 43 percent see the risks tilted to the upside, meaning growth could outpace forecasts.

That is a shift from June, when upside risks outweighed downside risks by 60 to 36 percent.

Ken Simonson, a survey analyst for NABE and the chief economist of the Associated General Contractors of America, cited a number of factors behind the somewhat more pessimistic outlook.

“There probably is more concern about North Korea and perhaps the Federal Reserve seems closer to making a move towards tightening,” he said. However, “Downside doesn’t translate into expectation of recession, but slower growth.”

AGENDA

Simonson also said decreased optimism about the success of Trump’s agenda in Washington likely contributed to the shift.

The survey showed 73 percent of respondents believed individual tax cuts will be enacted by the end of next year, down from 83 percent in the June survey, and 61 percent now see an infrastructure plan enacted, down from 83 percent previously.

The figures are much higher than those in NABE’s semi-annual survey of a larger group of economists released last month, which also showed rising concerns.

Simonson said he was highly skeptical that Washington will produce a major tax overhaul by the end of next year, given the complexity of the issue and the sharp political polarization in the US Congress.

Still, nearly three-quarters of panelists viewed the odds of a recession next year as 25 percent or lower, with the remaining group seeing a probability of 26 to 50 percent.

The survey was conducted while Hurricane Harvey pummeled Houston, Texas, but before Hurricane Irma hit Florida. The report made no attempt to assess the storms.

Analysts said hurricanes typically depress short-term growth, but the hit is made up for later as rebuilding fuels economic activity.

INTEREST RATE

The forecast for monthly nonfarm payroll growth for this year was unchanged at 178,000, but unemployment is now seen as averaging 4.4 percent, down from 4.5 percent in June.

Economists expect the US Federal Reserve to continue with a strategy of gradual interest rate increases, with the center of the federal funds target range seen at 1.375 percent at year end and 2.125 percent by the end of next year, from 1 to 1.25 percent currently.

After the Fed’s two-day policy meeting Wednesday, analysts see a good chance of a rate increase in December.

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