US President Donald Trump’s trade war with China would contribute to a sharp slowdown in economic growth this year and next, raising concerns about a possible recession starting late next year, the National Association for Business Economics (NABE) said.
The latest survey by a panel of 51 forecasters with NABE showed that they expect growth — as measured by GDP — to slow to 2.3 percent this year from 2.9 percent last year.
The new forecast marks a downgrade from the 2.6 percent estimate for this year’s economic growth that the NABE panel had made in June.
For next year, the forecasters expect GDP growth to fall to 1.8 percent. They see little likelihood of a recession over the next 12 months, but expect the risk to increase by late next year.
Gregory Daco, chief US economist at Oxford Economics, said the forecasting panel turned more pessimistic over the summer, with 80 percent of the economists now saying the risks are pointed to the downside.
“The rise in protectionism, pervasive trade policy uncertainty and slower global growth are considered key downside risks,” Daco said.
Trade conflicts are perceived as the leading risk, with 53 percent of the panelists identifying it as such, while 12 percent said they think weaker global growth is the biggest threat.
The forecasters estimate just a 7 percent likelihood of a recession starting this year, a 24 percent likelihood by the middle of next year and 47 percent by the end of next year. They foresee a 69 percent chance of a recession beginning by the middle of 2021.
The economy is in its 11th year of expansion, the longest on record in the US. To help avoid a recession, the US Federal Reserve has cut its benchmark interest rate twice this year.
Among the NABE panelists, about half foresee no further rate cuts this year; 43 percent envision at least one further cut.
By the end of next year, 69 percent expect the Fed to have cut its benchmark rate from where it is now.
The NABE is a professional organization made up of 2,800 members who use economics in their work. The group is holding its annual convention in Denver, Colorado, and is to hear from Fed Chairman Jerome Powell today.
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