Reuters Poll: U.S.-China Trade Reprieve Makes No Dent on Recession Chances

The recent truce in the U.S.-China trade war is not an economic turning point and has done nothing to reduce a significant risk that the United States could slip into recession in the next two years, a Reuters poll found.

Collateral damage from the trade conflict between the world’s two largest economies has hit financial markets and forced most major central banks to cut interest rates this year.

The Oct. 18-23 Reuters poll of more than 100 economists found growth and inflation views for the coming year and beyond barely changed, despite a White House announcement about a “phase 1” deal with China and suspension of tariffs scheduled to kick in this month.

“U.S.-China trade negotiations over the past 18 months have been a classic case of ‘one step forward, several steps back’. Despite recent encouraging noise on trade talks, there are more tariffs in place than three months ago,” noted Ajay Rajadhyaksha, head of macro research at Barclays in New York. “Our forecasts suggest that below-trend U.S. growth will persist for much of 2020. We still feel that the U.S. and the world economy will avoid recession in the coming months, but the U.S. will not be a global locomotive, as it was in 2018.”

The median probability of a U.S. recession in the next 12 months rose to 35% from 30% predicted a month ago – the highest percentage in this economic expansion. For the next two years, it held at a high 45%.

In response to an additional question, 75% of economists said the recent trade development between Washington and Beijing was not a turning point in easing uncertainty, Reuters adds.

That conclusion was evident in the consensus for U.S. economic growth, which is expected to slow to 1.6%-1.7% on an annualized basis each quarter between now and end-2020, down from 2.0% last reported.

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