Economy Watch: Business Economists Expect Slowdown

The next recession will likely occur sometime between the fourth quarter of 2019 and the second quarter of 2020, according to the latest NABE survey.

The National Association of Business Economists, in its quarterly June 2018 NABE Outlook Survey, makes a number of predictions for the U.S. economy for the rest of 2018 and ’19, based on the consensus of professional forecasters. The salient prediction: half of the respondents expect the next recession will occur sometime between the fourth quarter of 2019 and the second quarter of 2020. One-third suggests a later time, after the fourth quarter of 2020.

In the meantime, the median forecast for real U.S. GDP growth from the fourth quarter of 2017 to the fourth quarter of 2018 is 2.8 percent. The median forecast for real GDP growth from the fourth quarter of 2018 to the fourth quarter of 2019 calls for a moderation to 2.5 percent—unchanged from the March 2018 NABE Outlook Survey.

More than half of survey respondents—57 percent—currently said that the balance of risks to real GDP growth through 2019 is weighted to the downside, while 31 percent said the balance of risks is weighted to the upside. This is in contrast to results in the March 2018 survey, when more than 75 percent of the panel stating risks were largely weighted to the upside for 2018.

The median forecast for the year-end 2018 federal funds rate is 2.21 percent (that’s the midpoint of a range), which implies a slightly steeper interest-rate trajectory than in the previous survey, in which the median federal funds rate was forecast to be 2.125 percent. Projections for 2019 indicate a year-end rate of 2.875 percent.

Finally, the average unemployment rate for 2018 as a whole is expected to be at 3.9 percent. On a quarterly basis, the median forecast reflects a further slight decline to 3.8 percent in the third and fourth quarters of 2018, before settling at 3.7 percent throughout 2019.

The June 2018 NABE Outlook presents the consensus macroeconomic forecast of a panel of 45 professional forecasters. The survey, covering the outlook for 2018 and 2019, was conducted between May 9 and May 16, 2018.