NABE Outlook Survey - December 2019

NABE Panel Expects Slower Economic Growth but No Recession in 2020;
Downside Risks to the Outlook Outweigh Upside Risks


The December 2019 NABE Outlook presents the consensus macroeconomic forecast of a panel of 53 professional forecasters (see last page for listing). The survey, covering the outlook for 2019 and 2020, was conducted November 5-20, 2019. The NABE Outlook Survey originated in 1965 and is one of three surveys conducted by the National Association for Business Economics (NABE); the others are the NABE Business Conditions Survey and the NABE Economic Policy Survey. Founded in 1959, the National Association for Business Economics is the professional association for those who use economics in their work. NABE has over 2,900 members and 44 chapters nationwide. Eugenio Aleman, Wells Fargo, Chair; Jan Hogrefe, Boeing; Jack Kleinhenz, CBE, National Retail Federation; Sara Rutledge, StratoDem Analytics; Yelena Shulyateva, Bloomberg LP; and Ryan Sweet, Moody’s Analytics, conducted the analysis of survey responses for this report. The views expressed in this report are those of the panelists, and do not necessarily represent the views of their affiliated companies or institutions. This report may be reproduced in whole or in part with appropriate citation to NABE.

SUMMARY: “NABE Outlook Survey panelists believe the U.S. economy will continue to expand in 2020, but they anticipate that inflation-adjusted GDP growth will slow from 2.9% in 2018 to 2.3% this year and 1.8% in 2020,” said NABE President Constance Hunter, CBE, chief economist, KPMG. “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.”

“The panel is split regarding when the next recession will begin,” added Survey Chair Eugenio Aleman, economist, Wells Fargo Bank. “Respondents believe the odds that GDP will first turn downward by mid-2020 are about one out of five, but indicate there is a one-third chance that the downturn will not begin until the second half of 2021 or later.

“Seventy-one percent of panelists believe that the balance of risks is to the downside,” continued Aleman. ”Panelists consider trade policy to be both the greatest downside and upside risk to the U.S. economy through 2020. Consumer prices are expected to increase 1.8% in 2019 and 2.0% in 2020, less than in 2018. Furthermore, panelists expect the Federal Reserve to keep interest rates unchanged in 2020.”


• Panelists expect economic growth—as measured by inflation-adjusted gross domestic product (real GDP)—to continue. The median forecast for GDP growth in 2019 is 2.3%, unchanged from the October survey. Respondents anticipate GDP growth will register 1.8% in 2020, also unchanged from the October survey. Real GDP increased 2.9% in 2018.

• On a year-over-year basis, the median projection is for real GDP to rise 2.1% from the fourth quarter (Q4) of 2018 to Q4 2019 and by 1.9% through Q4 2020. In comparison, real GDP increased 2.5% year-overyear in Q4 2018. No panelists forecast a recession in 2020 (two quarters of negative GDP growth), although the median of the five most pessimistic forecasts indicates a decline of a 0.1% annual rate in Q4 2020.

• Overall, the view for the future improved compared to the October survey. In that survey, 81% of panelists indicated the balance of risk was tilted to the downside, compared to 71% in the December survey. Furthermore, 19% of the panelists currently believe the balance of risk is to the upside—an increase from the 8% of respondents who held this view in October. The share of panelists that believes risks are equally balanced remains at 10%.

• The odds of a recession occurring through the first half of 2020 remain generally low. Panelists put the odds of a recession starting in the second half of 2019 at 5%, rising to 21% by the first half of 2020 and 43% by the end of next year. Respondents put the odds of a recession starting by mid-2021 at 66%. The odds of a recession beginning after mid-2021are 34%.

• Trade policy continues to be the most widely cited dominant downside risk. Half of respondents in the December survey cites trade policy as the greatest downside risk to the U.S. economy through 2020, considering both probability of occurrence and potential impact. This figure is slightly below the 53% recorded in the previous survey. Another 14% of respondents list a political or geopolitical event as the great downside risk, an increase from 6% in October. Ten percent of panelists indicate a global growth slowdown as the greatest risk. Both a substantial stock market decline or market volatility and manufacturing weakness spilling over into consumption are cited as the predominant downside risks by 8% of respondents.