Why NABE Thinks a Recession Is Off the Menu in 2019

Economy

Published: June 3, 2019 8:50 am

Last Updated: January 6, 2020 4:08 am

The National Association for Business Economics (NABE) released its survey for the month of May, and despite overarching concerns about recession and trade wars, the panel saw a favorable outlook in the short term.

The June 2019 NABE Outlook presents the consensus macroeconomic forecast of a panel of 53 professional forecasters. The survey covers the outlook for each quarter of 2019 and 2020.

Overall, panelists expect economic growth, as measured by inflation-adjusted gross domestic product (real GDP), to remain positive but to decelerate through the end of 2020. Following an increase of 3.2% at a seasonally adjusted annual rate in the fourth quarter of 2018. The median forecast is for real GDP growth to slow to a 2.1% rate by the fourth quarter of 2019 and 1.9% by the fourth quarter of 2020.

Approximately 60% of panelists believe that risks to the economic outlook are weighted to the downside, compared with the 74% who held that view in March. Also, 10% believe risks are weighted to the upside, up from 6% in the March survey. The remaining 28% of respondents report that risks are balanced.

According to the panel, the odds of a recession remain generally low over the next 12 months, but they rise late in 2020. Panelists put the odds of a recession starting in 2019 at 15%, with a 35% probability of recession starting by the middle of 2020. Overall, panelists put the odds of a recession starting before the end of 2020 at 60%. This compares with odds of 35% in the March survey.

Gregory Daco, survey chair, chief U.S. economist, Oxford Economics, commented:

Increased trade protectionism is considered the primary downside risk to growth by a majority of respondents, followed by financial market strains and a global growth slowdown. Recession risks are perceived to be low in the near term, but to rise rapidly in 2020. Panelists put the odds of a recession starting in 2019 at 15%, climbing to 60% by the end of 2020. While a small majority of panelists anticipates the next Fed move will be a rate hike, the median forecast does not reflect any rate increases until the third quarter of 2020, and a majority of panelists believes weakness in the real economy would be the primary factor driving a rate cut.