According to Trump, American consumers are rich. According to an increasing number of economists, the United States is headed for a recession in the next two years, even if they think U.S. monetary policy is “about right”. It’s a theme that’s been building momentum for months now, but as of this week, based on a survey by the National Association of Business Economics (NABE), 34 percent of 226 economists think a recession will hit in 2021.
More specifically, 74 percent of those economists see recession by the end of 2021.
That’s up 25 percent from earlier this year.
“Of the 98% of respondents who believe a recession will come after 2019, the panel is split regarding whether the downturn will hit in 2020 or 2021,” the NABE survey said.
“A majority of respondents believes U.S. monetary policy is ‘about right,’ but the percentage holding this view has fallen from 75% in the previous two surveys to 62%,” NABE Survey Chair Megan Greene, senior fellow at the Mossavar-Rahmani Center of Business and Government at the Harvard Kennedy School, noted.
Why the drastic uptick in gloomy recession predictions? The NABE poll shows that economists are concerned that U.S. tariffs on China and other countries, as well as higher federal budget deficits, could hurt economic growth.
Since the beginning of this month, those recession concerns have intensified significantly, with the general consensus being that a quick trade deal with China isn’t going to happen.
"After more than a year since the U.S. first imposed new tariffs on its trading partners in 2018, higher tariffs are disrupting business conditions, especially in the goods-producing sector," NABE said in a July survey of the economy.
As other indicators, economists pointed out that several major countries have reported poor growth and that stock markets have declined.
Also, the spread between two- and 10-year Treasury yields has fallen below zero for the first time since 2007--a situation that many consider a reliable recession indicator.
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The NABE survey came out one day after Trump dismissed concerns about a recession.
"I'm prepared for everything. I don't think we're having a recession. We're doing tremendously well. Our consumers are rich… I gave a tremendous tax cut, and they're loaded up with money. They're buying. I saw the Walmart numbers, they were through the roof, " Trump told reporters.
The economy is widely viewed as Trump's top argument for re-election in 2020, which means that the administration is keen to refute any negative reports on to this end and blames the mainstream media for their "irresponsible rhetoric".
Still, for now, most economic signs appear to be solid.
Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low, and consumers are still optimistic. U.S. retail sales figures out last week showed that they jumped in July by the most in four months.
However, if the danger of recession keeps climbing it would certainly force the Trump campaign to change strategy as experts believe this will determine his chances of reelection. For instance, during the government shutdown earlier this year, his approval rating dropped to 40 percent.
According to a recent Gallup poll, only about four in 10 Americans approve of Trump's job performance. But that’s just one survey, and others indicate that a slight majority support his handling of the economy.
By Fred Dunkley for Safehaven.com