A Majority of Economists Think There Will Be a Recession by the 2020 Election

Posted on June 4, 2019 by katiecmorgan

How’s the Economy Doing?

Better than you might expect, and worse than you might have hoped, according to the National Association of Business Economics.

According to the organization’s latest survey of 53 professional economic forecasters, the consensus is that the economy will continue to grow at a 2.6% pace in 2019, down from last year’s 2.8% rate, and will slow to 2.1% in 2020. However, as the outlook for this year still seems good, a majority think a recession is possible before the next presidential inauguration.

Personal spending remains a bright spot. “The consumer continues to be the driver in the U.S. economy,” said Jack Kleinhenz, chief economist for the National Retail Federation and one of the analysts of the report. “Real personal consumption expenditures for 2019 is 2.4% year-over-year growth. It was 2.6% in 2018.”

But not all is good. “There are really headwinds in the housing market in terms of residential investment,” Kleinhenz said about this important “piece of the consumer equation.” The group expects that residential investment in 2020 will be down 1.3% from 2019’s levels. Because home prices have risen, particularly in the lower third of housing stock, many are now priced out of the market.

More than half of the panel said “the greatest downside risk is trade policy and increased protectionism,” Kleinhenz said. The thorny issue is a major driver of the possibility that growth could collapse by the end of next year. Right now, only 15% of the participants expect a recession in 2019. But by the end of 2020, the number rises to 60%. Because the November election is in the last quarter, if the majority of predictions are right, a recession would begin by then.

Only 35% thought that when the group surveyed its members in March. And these results do not fully take into account the escalated trade war situation. “Since the survey was done between May 6 and 14, 2019, the panelists could not take into account the most recent proposal by President Trump to impose a series of tariff increases from 5 to 25 percent on Mexico,” said Stephen Miller, director of the UNLV Center for Business and Economic Research at the University of Nevada, Las Vegas. “This significantly raises the uncertainty in international markets and would significantly lower the growth forecasts that are reported today as well as increase the projected likelihood of a recession.”

That drives up the chances that CEOs and CFOs could be “hesitant to spend their ample retained earnings gained over the last number of years,” said Benjamin Pace, chief investment officer and partner at Cerity Partners. “This hesitancy could slow economic growth to a trickle and even provoke recession sooner than one needs to occur based on the current strong shape of the US consumer.”

ERIK SHERMAN

FORTUNE

June 4, 2019

Wall St. sees rate hike in June: CNBC Fed Survey

Posted on March 15, 2016March 15, 2016 by katiecmorgan

Wall Street sees the Federal Reserve and its interest rate hike as down, but decidedly not out.

Ninety-five percent of the 42 respondents to the CNBC Fed Survey predict no rate hike at the March meeting, which begins Tuesday. A decision comes on Wednesday followed by a news conference from Fed Chair.

But nearly all the economists, fund managers and strategists believe that the U.S. central bank’s next move will be to raise interest rates and, on average, believe that next hike will come in June. In fact, 83 percent say the Fed’s next hike could come in June or even earlier, with a small minority saying April or May.

“Since the last FOMC meeting, U.S. GDP tracking estimates have moved up, the unemployment rate has ticked down, core inflation has firmed, the US dollar has sold off, and broader financial conditions have eased modestly,” wrote Neil Dutta, head of economics at Renaissance Macro Research, in response to the survey.

Respondents to Fed survey are also more optimistic on stocks. The S&P 500 (^GSPC) is forecast to end about 3 percent higher this year and 9 percent higher by the end of 2017. Those forecasts had come down sharply during the recent market sell-off.

On average, respondents see the Fed hiking twice this year, two fewer hikes than the median forecast of members of the rate-setting Federal Open Market Committee. That number will likely come down after the Fed releases on Tuesday a new set of FOMC projections, the first of the new year.

Jack Kleinhenz of Kleinhenz & Associates sees the better economic data, but still believes the Fed “will remain in a holding pattern until some of the world worries have been reduced.”

Yet, while forecasts for the 10-year yield(U.S.:US10Y) came down with the sell-off, they have not rebounded. Treasury yields are seen rising from their current levels but the forecast remains muted. The yield, currently at 1.96 percent, is seen rising to just 2.34 percent by the end of the year, about 20 basis points less than had been forecast in the January survey. The yield in 2017 is projected to increase to 2.83 percent, about on par with the prior survey.

Interestingly, the outlook for inflation has worsened, though it still remains low. This year, the consumer price index is forecast to rise to 2.14 percent, about the same as in January, but in 2017, inflation is seen going up to 2.41 percent, about 10 basis points worse than the prior survey.

“Rising core inflation and falling unemployment should have a data-dependent Fed raising rates next week. It is unlikely to. Communications are a mess,” said John Ryding, chief economist at RDQ Economics.

The risk of the U.S. entering recession has come down to 24 percent from its recent high of 29 percent in January. Global economic weakness is seen as the biggest threat to the economic recovery, while tax and regulatory policies are second. GDP is expected to remain around 2 percent for this year and next.

And there are also political worries. “Beyond global economic weakness we worry political rhetoric and the outcome of the presidential election could negatively impact the market, as investors never like uncertainty,” said John Roberts, director of research at Hilliard Lyons. “Political polarization is certainly not positive for the equity markets.”

The CNBC survey was conducted March 10 and 11.

By Steve Liesman

Economists Say Retail Sales for 2016 Will Grow Slowly

Posted on January 20, 2016February 1, 2016 by katiecmorgan

Retail sales in 2016 are expected to mirror 2015, and continue the current pattern of slow, steady but not very exciting growth, according to economists and industry experts who spoke at the National Retail Federation convention Tuesday.

The nation’s merchants likely will see “sluggish growth for a long time, unless there is something on a global level that shocks the economy,” said Paula Campbell Roberts, executive director, research, at Morgan Stanley, who participated in a panel discussion for press at the annual retail gathering at the Javits Convention Center in New York City.

Close to 34,000 retail professionals are attending the four-day gathering this year, looking for ways the boost store sales, which disappointed during the recent holiday season. More than 500 vendors are at the convention pitching high-tech solutions including ways to send messages to shoppers over their cell-phones, or payment methods that let consumers skip the checkout line.

In 2015, total retail sales rose 2.1 percent over 2014, according to U.S. Department of Commerce figures released last week. The retail panelists said Tuesday that they expect to see similar growth this year.

The NRF reported on Friday that holiday sales – excluding automobiles, gasoline and restaurant meals – rose 3 percent in 2015, missing the federation’s forecast of 3.7 percent sales growth in November and December.

Jack Kleinhenz, chief economist for the NRF, said Tuesday that missing the forecast made 2015 “from some perspectives a disappointing year.” However, he said, people should realize that 3 percent growth “ain’t all that bad.”

Individual retailers have been reporting mixed holiday results, with some, including The Children’s Place in Secaucus and Wayne-based Toys “R” Us, saying their holiday sales strongly outpaced the previous year’s, while other retailers reported declines.

Softness in retail sales extended to the luxury sector, which had been insulated from the overall retail downturn.

Luxury jeweler Tiffany reported Tuesday that its global holiday sales declined 9 percent and U,S holiday sales fell 10 percent, reflecting problems in the Chinese economy and a drop in foreign tourism in this country.

Kleinhenz Tuesday said retailers missed forecasts in part because early discounting in October pulled sales away from November, and that lower prices resulted in lower sales totals. Retailers, Kleinhenz said, are being hurt by a shift in spending away from clothes and other goods and toward experiences such as travel or health and wellness treatments.

Consumers, Kleinhenz said, “are spending more on themselves than on goods.”

Shawn Dubravec, chief economist at the Consumer Technology Association, said there was a “clear loss of momentum” in consumer spending at the end of 2015, but it is hard to tell if it was caused by a larger trend or a response to temporary issues.”

The problem with forecasting sales, he said, is “it’s always something – this time last year we were talking about abnormal amounts of snowfall” hurting holiday sales. This year, unusually warm weather is being blamed for weak sales.

Dubravec is relatively optimistic about 2016. Last year, he said, “was defined by unevenness” and “we expect less unevenness in 2016.”

However, the panelists noted that uncertainty or unexpected events, such as terrorism or other global problems, or even upheaval caused by the presidential election, will hurt retailers, because consumers tend to curb their spending when they are unsure about what’s ahead.

BY JOAN VERDON

January 18, 2016

Email: verdon@northjersey.com