WASHINGTON: A very possible recession within the next three years would take place in the United States, economists warned Saturday at a meeting of U.S. governors.
There is a “100 percent certainty” of a recession between now and 2018, President of Fosler Group Gail Fosler said at the 2016 National Governors Association Winter Meeting, which gathers more than 30 state governors across the country.
Urging governors across the country to prepare in advance, Fosler said it is not only because of the economic cycle, but also because what she foresees a financial shock in the upcoming years.
The speculation of the U.S. economy entering a recession has been long, given the uncertainty of the stock market and the downward trend of manufacturing, said Joseph Lake, Global Economist from the Economist Intelligence Unit.
Though there is no need to worry about a recession now, the chance for the U.S. economy to enter into recession is more than 50 percent in the next two to four years, he noted.
“There is already a recession in the energy sector,” Mark Finley, General Manager of Global Energy Markets and U.S. Economics from BP America Inc., said at the panel discussion.
There is a collapse in spending, investing and jobs in the energy sector, said Finley, adding that “the reverberations of the energy shock truly are felt nationwide, because of the national dimension of our supply chain.”
Acknowledging the fact that the United States is still the world’s second-largest net importer of oil, Finley argued that the falling oil prices is beneficial to the U.S. economy.
However, consumers are not spending the windfall resulted from low oil prices, which poses a real concern for the economy, he added.
Despite the predictions from most of the panelists, only one guest differs.
“I don’t think it is a hundred percent chance of a recession in next three years. It happens when you have a massive spike in oil prices, or a big bubble in some parts of the economy,” said Ethan Harris, managing director from Bank of America Merrill Lynch.
However, he added, given more years, people will get really worried, though the absence of the preconditions of a recession are not in place now.
The U.S. economic growth cooled to 0.7 percent in the fourth quarter of 2015, sharply down from a robust 2 percent growth in the third quarter.
A stronger U.S. dollar, lukewarm consumer spending and the turbulent global economic outlook are blamed for the slowdown.
Considering the changing scenario, the Federal Reserve becomes more cautious about raising interest rates. Analysts also cut their projections for the rate hikes in 2016 from four to two.
