Tue, Feb 26, 2019 - Page 10 News List

Economists see recession soon: survey

BY END OF 2020?Only 10 percent of member economists responding to a National Association for Business Economics survey said they foresee a recession this year


Traders work beneath a television broadcasting Jerome Powell on the floor of the New York Stock Exchange in New York on Jan. 30.

Photo: Bloomberg

About 50 percent of US business economists say they think that the US economy would slip into recession by the end of next year, and 75 percent envision such a downturn beginning by the end of 2021.

The finding comes from the latest survey by the National Association for Business Economics of its member economists.

Just 10 percent of them say they foresee a recession beginning this year. At the other extreme, only 11 percent expect the economy to avoid a recession through 2021.

The economy began its expansion in June 2009, when the Great Recession officially ended. If it endures beyond June this year, the expansion would become the longest on record.

Compared with other recessions, this one has been tepid, with annual economic growth averaging just slightly above 2 percent.

However, many economists say its modest pace has helped prolong the expansion, in part by keeping inflation in check.

The association economists approve of the US Federal Reserve’s management of interest rates, with nearly 75 percent of them calling the Fed’s policymaking “about right.”

Having raised rates four times last year, the Fed and chairman Jerome Powell have pledged to be “patient” about rates — which most analysts have taken to mean that they are done raising rates for at least a few months.

Investors are collectively betting that the Fed would not raise its benchmark rate at all this year, but the association survey found that 39 percent of economists foresee one rate increase — and 26 percent say they think the Fed would raise rates twice this year.

The economists were divided on how to address the government’s swollen budget deficits, with about half of them favoring higher taxes and half favoring spending restraints.

Among potential tax increases, 50 percent support a broad-based energy or carbon tax, and 48 percent support raising individual or corporate taxes.

On a proposal by US Representative Alexandria Ocasio-Cortez to raise the marginal tax rate on the very wealthy to 70 percent, 42 percent of respondents said they thought such a tax would have a net negative effect.

By contrast, 17 percent said they believed that it would benefit the economy. An additional 33 percent of those surveyed said the effect could be negative or positive depending on how the extra tax revenue was used.

More than 90 percent of the economists said the increased tariffs that US President Donald Trump’s administration has imposed in its trade conflicts with China and other countries would slow economic growth this year.

Their estimates range from a subtraction of one-fourth of a percentage point in growth to a reduction of 1 percentage point or more.

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