NEW YORK – Amid uncertainty over President Donald Trump’s growth agenda, US economists increasingly are worried about risks to the economy, though they see little chance of a recession near term, according to a survey released today.
The National Association for Business Economists (NABE) quarterly survey showed little change in the forecasts compared with June in key areas such as economic growth, which was projected at 2.2% in 2017 and 2.4% in 2018.
But the September survey of about 50 economists showed 48% believe the risks to the economy are weighted to the downside, indicating chances for an economic slowdown, while 43% see the risks tilted to the upside, meaning growth could outpace forecasts.
That is a shift from June, when upside risks outweighed downside risks by 60% to 36%.
Ken Simonson, a survey analyst for NABE and the chief economist of the Associated General Contractors of America, cited a number of factors behind the somewhat more pessimistic outlook.
“There probably is more concern about North Korea and perhaps the Federal Reserve seems closer to making a move towards tightening,” he told AFP.
However, “downside doesn’t translate into expectation of recession, but slower growth”.
Simonson also said decreased optimism about the success of Trump’s agenda in Washington likely contributed to the shift.
The survey showed 73% of respondents believe individual tax cuts will be enacted by the end of 2018, down from 83% in the June survey. And 61% now see an infrastructure plan enacted, down from 83% previously.
And those figures are much higher than those in NABE’s semi-annual survey of a larger group of economists released last month, which also showed rising concerns.
Simonson said he was highly sceptical Washington will produce a major tax overhaul by the end of 2018 given the complexity of the issue and the sharp political polarisation in Congress.
Still, nearly three-quarters of panelists viewed the odds of a 2018 recession as 25% or lower, with the remaining group seeing the chance as 26% to 50% probability.
The survey was conducted while Hurricane Harvey pummelled Houston, but before Hurricane Irma hit Florida. The report made no attempt to assess the impact of the storms.
Analysts say hurricanes typically depress short-term growth, but the hit is made up for later as rebuilding fuels economic activity.
The forecast for monthly non-farm payroll growth for 2017 was unchanged at 178,000, but unemployment is now seen as averaging 4.4%, down from the 4.5% in June.
Economists expect the Federal Reserve to continue with a strategy of gradual interest rate increases, with the centre of the federal funds target range seen at 1.375% at year-end, and 2.125% by the end of 2018, from 1.00-1.25% currently.
After the Federal Reserve’s two-day policy meeting last Wednesday, analysts foresee a good chance of an interest rate increase in December.