Evidence of the slowing economy continues to accumulate. The most recent survey by the National Association of Business economists shows members anticipating declining GDP growth.
“NABE Outlook Survey panelists believe the U.S. economy will continue to expand into 2020, but they anticipate GDP growth will fall below 2% next year for the first time since 2016,” said NABE President Constance Hunter, CBE, chief economist, KPMG. “The consensus forecast calls for real GDP growth to slow from 2.9% in 2018 to 2.3% in 2019, and then to 1.8% in 2020.”
“The panel turned decidedly more pessimistic about the outlook over the summer, with 80% of participants viewing risks to the outlook as tilted to the downside,” added Survey Chair Gregory Daco, chief U.S. economist, Oxford Economics. “The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to U.S. economic activity.”
NABE pessimism has persisted. In August, we wrote,
The National Association of Business Economists reports that 74 percent of NABE members predict a recession by the end of 2021.
The Associated Press reports recession remains likely in the next two years.
The forecasters estimate just a 7% likelihood of a recession starting this year, a 24% likelihood by mid-2020 and 47% by the end of 2020. They foresee a 69% chance of a recession beginning by mid-2021.
The risk factors cited in the recent forecast have become more pronounced.
- Four out of five panelists (81%) believe that risks to the economic outlook are weighted to the downside, an increase from the 60% who held this view in June. Only 8% believe risks are weighted to the upside—down from 10% in the June survey—while 10% of respondents report that risks are balanced.
- Trade policy is perceived as the dominant risk, with 53% of panelists citing it as the key downside risk to the economy through 2020. Roughly 12% of respondents consider slower global growth to be the main downside risk. Even smaller shares of respondents view the greatest risk to be financial market volatility (10%) or the risk of a geopolitical event (6%).
The survey is “the consensus macroeconomic forecast of a panel of 54 professional forecasters.”
Small Business optimism is also beginning to lag, according to today’s NFIB release, but they remain more upbeat than the business economists.
The small business Optimism Index maintained a historically solid reading, but took a dip in September, falling 1.3 points to 101.8. September’s figure falls within the top 20% of all readings in the Index’s 46-year history. The survey shows no sign of a recession and indicated continued job creation, capital spending, and inventory investment, all consistent with solid, but slower growth. The Uncertainty Index rose 2 points, revisiting high levels of concern.
Again, public policy considerations affect the outlook.
“As small business owners continue to invest, expand, and try to hire, they’re doing so with less gusto than they did earlier in the year, thanks to the mixed signals they’re receiving from policymakers and politicians,” said NFIB President and CEO Juanita D. Duggan. “All indications are that owners are eager to do more, but they’re uncertain about what the future holds and can’t find workers to fill the jobs they have open.”
Last week we wrote that labor shortages have affected small business hiring.