Odds of recession grow to 1-in-3 as trade war weakens US economy

Odds of recession grow to 1-in-3 as trade war weakens US economy

The longest economic recovery in U.S. history, now spanning more than 10 years, hasn’t been without bumps in the road. Recession indicators spiked in both 2012 and 2015 before growth rebounded. This year, the expansion may not bounce back. At least, not soon enough to avoid a downturn that would roil a presidential campaign in which the incumbent Republican has tied his reelection pitch to U.S. economic strength; strength that he promised to buoy by loosening business regulation and cutting corporate taxes. "We are worried that the economy will not be as lucky this time for a few reasons," economists at Bank of America wrote in a report analyzing recession risks that cited geopolitical trends as well as hard data and suggested a 1-in-3 chance of a downturn within the next year. First, the recovery is older than it was before and the economy has returned to full capacity, meaning growth is tougher to achieve. The Federal Reserve’s toolkit for fighting a downturn, meanwhile, is limited, with interest rates already low and a balance sheet still carrying the bulk of trillions of dollars in securities purchases made to goose the economy after the 2008 financial crisis. Finally, "there is a persistent shock hitting the global economy — the trade war — creating high uncertainty," said Bank of America economist Michelle Meyer. "The trade war continues to escalate and it is not obvious that the Fed has enough ammo to counter the drag." That assessment mirrors months of warnings from […]

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