Economists surveyed by Bloomberg in June saw a 30% chance of a recession in the next year, according to the median estimate. That compares with 15% in late 2018.
Growth was already on course to slow this year as the stimulative effects of last year’s tax cuts waned.
Then the U.S. was hit by what Cummins dubbed a “deglobalization shock” as Trump’s trade battles with China and other nations sapped business confidence and hurt the world economy.
Trump and Chinese President Xi Jinping decided on Saturday to resume trade negotiations after a six-week stalemate, with the U.S. agreeing to a temporary freeze on further tariffs on Chinese goods. Stocks advanced globally Monday after the truce and U.S. equities rallied to record highs.
Still, the impact of existing tariffs imposed from the trade war is trickling through the economy. A gauge of U.S. factory activity fell in June for the third straight month to its weakest level since October 2016, according to a survey of purchasing managers by the Institute for Supply Management released Monday. The measure of new orders fell to 50, the lowest since December 2015 and equaling the dividing line between growth and contraction.
The hit to manufacturing from the trade tensions has led to a pile-up of unwanted inventories that companies will need to work off, curbing production and growth in the process.
And it’s resulted in an economy that’s overly reliant on one engine to sustain the expansion — consumers — as businesses have curbed investment and residential construction has lagged.
“The economy has become less well balanced and a little more fragile,” said Andrew Hollenhorst, chief U.S. economist for Citigroup Inc.
That puts a premium on a continued strong job market to provide the fuel for consumer purchases.
After a surprise slowdown in payrolls growth to 75,000 in May, net hiring probably picked up to 160,000 in June, according to the median forecast of economists surveyed by Bloomberg. The data are due July 5.