While Split on When, Economists Most Certain A Recession Is Coming

According to the most recent survey form the National Association for Business Economics (NABE), we can probably expect the United States economy to fall into another recession by the year 2021.  The NABE survey is among the most watched of all economic metrics, taking into account the opinion of approximately 300 of the top economics from major institutions.  

The input was collected between January 30 and February 8 to indicate varying degrees of concern.  Approximately 10 percent worry of a recession hitting later this year; 42 percent believe it could happen next year.  Another 25 percent believe we will be able to hold it off until 2021. 

In all, though, the data shows that 77 percent of these economists are certain we are headed directly into a recession within the coming three calendar years. But while they seem to agree that one is coming, the survey members do appear to agree on how the Fed’s balance sheet normalization process will impact this recession; hence the different opinions regarding the year it will hit. 

Survey chair Megan Green is the global chief economist with Manulife Asset Management. She reminds “There is a schism between what the NABE panel and the markets think about the Fed’s rate path and the shrinking of its balance sheet.”

As you might expect, when the Federal Reserve central bank notioned they would stop the restrictions placed over the past few years, concerns about the US economy started to emerge.  And, in this uncertainty, Federal Reserved Chairman Jerome Powell stated that the central bank is going to simply be patient, this year, which triggered yet more caution. 

Essentially, when the Fed starts a slow-down period of an interest rate hike cycle, that is typically an indicator that a recession is, in fact, looming.  This is of particular import, right now, because the Fed raised interest rates four times last year.  As such, investors are now betting, collectively, that the Fed will not raise its benchmark interest rate at all, for the entire year.  On the other hand, the NABE survey suggests that nearly 40 percent of all economists foresee at least one interest rate next year; 26 percent anticipate the Fed will institute two such raises. 

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