Forget the R-word, at least for the moment. The standard economic forecast nowadays is for an economic slowdown, both in the US and globally, and not a recession.
The Organization for Economic Cooperation and Development is the latest to sound off on an expected slowdown for US economic growth, dipping to 2.4% in 2019, from 2.9% last year. The OECD thinks growth will ebb to 2.0% in 2020. This mirrors a slower pace the international organization anticipates world-wide: 2.9% in 2019 and 3.0% in 2020, down from 3.6% in 2018.
There is a difference between a slowdown, which means an economy is still growing but at a reduced rate, and a recession, namely a contraction in growth. In the US, the rule of thumb is for two consecutive quarters of negative growth. A private nonprofit group, called the National Bureau of Economic Research, actually makes the call, based on a host of metrics.
Among the American population at large, however, the economic view is downright pessimistic. That is, they think a recession is barreling toward us. In fact, six out of 10 people expect a recession in 2020, an ABC News/Washington Post poll finds.
Among establishment figures, recession predictions are scarce. Federal Reserve Chairman Jerome Powell has been sounding the line that the US will avoid a recession. The two recent reductions in the Fed’s benchmark interest rate, a quarter-point each, are meant as insurance in the event that some worrisome developments pose problems ahead, he says.
As Powell recently put it, “the most likely outlook for our economy remains a favorable one with moderate growth,” and “our main expectation is not at all that there will be a recession.”
The culprits for a slowdown are the US-China trade war, chaos if Britain leaves the European Union without an exit deal, and less-robust Chinese and European expansions, after strong runs in recent years.
“The global economy is facing increasingly serious headwinds and slow growth is becoming worryingly entrenched,” said OECD Chief Economist Laurence Boone in a statement. “The uncertainty provoked by the continuing trade tensions has been long-lasting, reducing activity worldwide and jeopardizing our economic future.”
The Federal Reserve, in its study released Wednesday, projects that US gross domestic product growth will be 2.2% this year, and gradually decline over the next three years: 2.0% in 2020, 1.9% in 2121, and 1.8% in 2022.
Meanwhile, a Deloitte survey of chief financial officers, released in July, shows 80.5% expect a “mild” downturn in the next two years, not a recession. Only 15% believe there will be a recession this year or next.
Of course, in 2007, projections were similar. So don’t discount the chances of an unhappy surprise.