Over 75% of Economists Predict a Recession by 2021

More than three-quarters of business economists expect the U.S. to enter a recession by the end of 2021, though a majority still estimate the Federal Reserve will continue raising interest rates this year.

According to a National Association for Business Economics survey, 10% saw a recession beginning this year, 42% project one next year, while 25% expect a contraction starting in 2021.  The rest expect a recession later than 2021 or expressed no opinion.

The economy began its expansion in June 2009, when the Great Recession officially ended. If it endures beyond June this year, the expansion will become the longest on record. Compared with others, the current one has been tepid, with annual economic growth averaging just slightly above 2%. But many economists say its modest pace has helped prolong the expansion, in part by keeping inflation in check.

The NABE economists approve of the Federal Reserve’s management of interest rates, with nearly three-quarters of them calling the Fed’s policymaking “about right.”

Having raised rates four times last year, the Fed and its chairman, Jerome Powell, have pledged to be “patient” about rates – which most analysts have taken to mean that they’re done raising rates for at least a few months. Investors are collectively betting that the Fed won’t raise its benchmark rate at all this year. But the NABE survey found that 39% of economists foresee one rate increase – and 26% say they think the Fed will raise rates twice this year.

President Donald Trump’s trade policies also remain a concern for most of the panelists: 36% said the existing tariffs, if they remain in place, will reduce 2019 gross domestic product growth by 25 basis points, while 26% saw a drag of 50 basis points and 15% of panelists expect the reduction to exceed 50 basis points.  Economists also expected the tariffs to boost inflation this year.

Source:  National Association for Business Economics/Bloomberg