Slower growth but no recession is the overwhelming sentiment of economists looking ahead to 2020.
The latest outlook from the National Association of Business Economists, based on a panel of 53 forecasts, looks for GDP growth next year, adjusted for inflation, to slow from an estimated 2.3% this year to 1.8% in 2020.
“The consensus forecast calls for a pickup in housing, but slower growth in business investment and consumer spending, along with larger deficits in trade and the federal budget,” said NABE President and KPMG Chief Economist Constance Hunter, in a statement.
Seventy-one percent of panelists see a balance of risk leaning toward the downside, led by concerns about trade policy, down from 81% in the October survey, but trade policy was also noted by 42% to be the greatest upside risk to their forecasts.
More than 80% of the panelists had lowered their baseline forecasts for 2019 and 2020 due to concerns about trade tensions, including the ongoing trade war between the U.S. and China. Negotiators for both sides are now planning for a delay of additional sanctions that the U.S. is set to impose on Sunday.
Despite the imposition of tariffs on imports from China and elsewhere, the U.S. trade deficit grew slightly, by 1.3%, through the first 10 months of the year. The NABE panelists expect the U.S. trade deficit will widen to $1 trillion in 2020 from $979 billion in 2019 and the budget deficit will reach $1.08 trillion for the fiscal year ending in September 2020.
Only one in five panelists expect U.S. growth will turn negative by mid-2020; about one-third expect the economy will turn down by the second half of 2021.
Given this middling forecast, NABE panelists expect the 10-year Treasury yield, which has been holding steady, will close 2019 at 1.8% and end 2020 near 2%. A plurality, 43%, expect Fed monetary policy will remain unchanged. Forty-one percent, however, foresee either one additional rate cut or rate hike of 25 basis points.
Inflation is expected to rise only slightly, from 1.8% in 2019 to 2% in 2020.