Business economists revise GDP estimates downward; trade exposure seen as major concern

The latest monthly survey of business economists finds most of them are revising their estimates of economic growth downward. The Associated Press reports,

The nation’s business economists foresee a sharp slowdown in U.S. economic growth over the next two years…

That finding comes from the latest survey by the National Association for Business Economics being released Monday. Its economists collectively project that growth, as measured by the gross domestic product, will reach a modest 2.4 this year and just 2 percent in 2020. Among the key factors in their dimmer assessment are a global slowdown and the ongoing trade conflicts…

We reported that last month’s NABE survey found three-quarter of business economists anticipated a recession by the end of 2021. This month’s survey agains confirms uncertainty and concern about the slowdown.

“NABE Outlook Survey panelists believe the U.S. economy has reached an inflection point, with the consensus forecasting real GDP growth to slow from 2.9% in 2018 to 2.4% in 2019, and to 2.0% in 2020,” said NABE President Kevin Swift, CBE, chief economist, American Chemistry Council. “The panel has turned less optimistic about the outlook since the previous survey, as three-quarters of respondents see risks tilted to the downside, and only six percent perceive risks to the upside.”

“A majority of panelists sees external headwinds from trade policy and slower global growth as the primary downside risks to growth,” added Survey Chair Gregory Daco, chief U.S. economist, Oxford Economics. “Three-quarters of respondents have reduced their 2019 GDP growth outlook in response to trade policy developments. Nonetheless, recession risks are still perceived to be low in the near term. Panelists put the odds of a recession starting in 2019 at around 20%, and the odds of a recession by the end of 2020 at 35%.”

It is, of course, a commonplace to point out that economists often disagree. But the risks apparent to business economists – trade and slower global economic growth – are widely understood.

For a Washington perspective on trade policies, particularly in North America, we recommend this Seattle Times op-ed by Lori Otto Punke, president of the Washington Council on International Trade.

International trade has always been a cornerstone of Washington state’s economy. Indeed, Washington is one of the most productive and innovative states in the nation, thanks in large part to our robust trading relationships with Canada and Mexico. Since NAFTA was signed, Washington’s exports to Canada and Mexico have jumped 200 and 700 percent, respectively. Today, nearly 13 percent of our state’s total exports go to our two neighbors, including nearly $10 billion in goods and $2.5 billion in services.

USMCA would bring North American trade policy into the 21st century and bolster many local industries.

She concludes,

Trade with Canada and Mexico currently accounts for 330,000 jobs across Washington. If our already strong trade relationships are reinvigorated under USMCA, there’s no telling how many more opportunities will arise for our farmers, artists, scientists, and technologists. For their sake and ours, let’s get the “New NAFTA” across the finish line.