Eugene Grygo, Chief Content Officer, FTF News
To say the least, there is a great deal of nervousness about the economy and, particularly, the “R” word.
If it’s any comfort, finding a clear consensus among economists about whether and when there might be an economic recession is mostly impossible as the results from a recent survey underscore.
The survey in question is from the National Association for Business Economics (NABE), based in Washington, D.C. The results of the February 2019 NABE Economic Policy Survey are based upon the responses from 281 NABE members, representing many sectors, including financial services. The survey is conducted semiannually, and was administered January 30 to February 8, 2019, officials say.
A majority of those surveyed do anticipate problems from now until 2021, but there is no agreement on when a downturn will hit.
“Three-fourths of the NABE Policy Survey panelists expect an economic recession by the end of 2021,” says NABE President Kevin Swift, CBE, chief economist at the American Chemistry Council, in a prepared statement.
“While only 10 percent of panelists expect a recession in 2019, 42 percent say a recession will happen in 2020, and 25 percent expect one in 2021,” Swift says. “A majority of panelists also indicates they would be worried about a budget deficit in the U.S. that equaled up to 4 percent of gross domestic product. This is an outcome which will likely occur in 2019 given the deficit for fiscal year 2018 was 3.85 percent, and respondents expect spending policies to increase the deficit compared with the Congressional Budget Office’s current 10-year baseline estimate.”
Interest rates are another area where there is a divergence of opinion.
“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,” says Survey Chair Megan Greene, global chief economist at Manulife Asset Management, in a prepared statement.
“The markets are pricing in no more interest-rate hikes in 2019, whereas a majority of the NABE panel expects one or two rate hikes this year,” Greene says. “Survey results also reveal that, while investors have frequently blamed higher borrowing costs on the Fed’s quantitative tightening, the panel is inconclusive regarding the impact of shrinking the Fed’s balance sheet on short- and long-term rates.”
Surprisingly, the respondents say that there may be an upside to President Trump’s deregulation.
“A majority (57 percent) of respondents expects the economy will continue to benefit from the Trump administration’s deregulatory agenda in 2019-2020, although 44 percent believe the positive effects will be less substantial relative to the first half of the administration’s tenure, and only 13 percent think the effects will be more substantial,” according to the survey results. “A quarter (25 percent) of respondents believes the administration’s deregulation efforts will negatively impact the economy in 2019-2020, while 10 percent expect no impact whatsoever.”
The diverging opinions even extend to the fall of Lehman Brothers, according to the survey results. “A decade after Lehman Brothers’ collapse, a majority of respondents (58 percent) does not think it was a mistake to let the firm fail; 31 percent believe it was a mistake. The remaining 12 percent do not know or have no opinion,” according to the report.
So, given that there are no clear signs about exactly when a downturn will hit, most financial services firms are presumably hoping for the best and preparing for the worst.
They may also be hoping secretly that the experts are wrong and that a recession will be averted. Even the economists might be happy to be wrong about that.
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