More than three-quarters of business economists expect the U.S. to enter a recession by the end of 2021, though a majority still estimate the Federal Reserve will continue raising interest rates this year.
Ten percent saw a recession beginning this year, 42 percent project one next year, while 25 percent expect a contraction starting in 2021, according to a semiannual National Association for Business Economics survey released Monday. The rest expect a recession later than 2021 or expressed no opinion, the Jan. 30-Feb. 8 poll of nearly 300 members showed.
The projections come ahead of the Commerce Department’s release this week of the advance reading for fourth quarter gross domestic product, which was delayed by the government shutdown. Economists surveyed by Bloomberg projected as of Friday that growth cooled to a 2.5 percent annualized rate in the final months of 2018 from 3.4 percent in the third quarter.
NABE members were divided on the impact of the Fed’s balance sheet normalization process. Asked about the effect of the tightening on short-term funding rates, a fifth said saw no impact, a fifth said it would raise rates by 25 basis points, and a fifth said said they would rise 50 basis points or more. The remaining respondents didn’t know or express an opinion.