US economy will briefly slip into recession next year

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US economy will briefly slip into recession next year

Published: Tue 19 Feb 2019, 8:50 PM

Last updated: Tue 19 Feb 2019, 10:58 PM

The US economy will slip into recession for two quarter next year, says a global researcher.
"We do expect a US recession next year - but only a mild one. Primary reason is that if you look back at previous economic expansions, they don't' last this long. We are looking at growth in Q1 slowdown and then actually contractions in second and third quarter. Growth to rebound in Q4 because we expect US Federal Reserve will cut rates to 1.75 per cent," said Mark Matthews, Managing Director and Head of Research Asia at Julius Bär.
"The US economic expansion has already lasted unusually long for 10 years and we do expect interest rates to go up more. Sometimes interest rates can trigger recession," Matthews said during an interview with Khaleej Times recently.
Larry Summers, former US treasury secretary, has also predicted 50 per cent chance of US recession.
"The US economy grew 2.5 per cent over the past 30 years and it is a good average. Germany, UK and other Eurozone economies are slowing down. The Europe does not look good but US look good. And therefore, we are in a situation where the market can go up because the Fed has just changed its communication in the last month to become more dovish," he added.
He noted that the US economic data is robust and earnings were strong, too.
"What is interesting is that data in the US is still so robust. Just pick one umbers, jobs for both December and January were over 300,000 - which is twice for the consensus forecast. In the Q4 forecast, economic data and earnings were strong. But I don' think that it is really sustainable because the US economy has been really very strong. First time in many decades, there are more jobs available than people looking for it. There are 7 million jobs openings in the US right now and around 6m unemployed people," he added.
Hence, Matthews sees wage growth should continue to accelerate in the US. Also, between now and in the next couple of quarters, there is a room for the markets to rise. "It won't rise at the rate it rose in January." - waheedabbas@khaleejtimes.com

By Waheed Abbas

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