Business Economists Display Cautious Optimism for U.S. Economy, Eyeing External Risks

Washington, D.C. – In a revealing survey by the National Association of Business Economics (NABE) released on Monday, a mere 25% of business economists and analysts anticipate the United States entering a recession this year.

The survey suggests that if a downturn occurs, it would likely stem from an external shock, such as a potential conflict involving China, rather than domestic economic pressures like the recent surge in interest rates.

Economists Cautiously Optimistic About U.S.
Credit: DepositPhotos

Despite the Federal Reserve’s aggressive campaign against inflation, which saw the benchmark interest rate elevated 11 times from March 2022 through July 2023 to its highest in over two decades, the U.S. economy has shown unexpected resilience.

Inflation rates have receded from a peak of 9.1% in June 2022 to 3.4% by December of the same year, with the economy continuing to expand and the job market staying robust.

This combination of decreasing inflation and steady growth has fueled optimism among economists that the Fed might successfully manage a so-called soft landing, quelling inflation without triggering a recession.

“Panelists are more optimistic about the outlook for the domestic economy,” stated Sam Khater, Freddie Mac’s chief economist and the chair of NABE’s economic policy survey committee.

The survey highlights a shift in sentiment regarding the Federal Reserve’s current monetary policy, with 21% of respondents deeming it “too restrictive,” an increase from 14% in August. However, a majority (70%) believe the Fed’s policy stance is appropriate.

External factors, however, loom large over this optimistic outlook. The survey indicates significant concern over geopolitical tensions, particularly the possibility of a conflict between China and Taiwan, which 63% of respondents view as a moderate to high probability.

Additionally, nearly all participants (97%) acknowledge at least a moderate risk of Middle Eastern conflict driving oil prices above $90 a barrel, significantly impacting global shipping.

With the U.S. presidential election on the horizon, 85% of those surveyed express apprehension over potential political instability in the United States around the November 5 election.

Economists Cautiously Optimistic on U.S. Economy
Credit: DepositPhotos

Concerns extend to the fiscal front, with 57% advocating for more disciplined government budget policies to address the substantial deficit between government spending and tax revenues.

The survey participants prioritize promoting medium- to long-term growth (45%) and reducing the federal deficit and debt (42%) as the primary objectives of government budget policy.

As the U.S. navigates these economic and geopolitical challenges, the insights from the NABE survey underscore the delicate balance between fostering growth and maintaining fiscal responsibility, all while keeping a watchful eye on external threats that could disrupt the nation’s economic trajectory.

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