US headed for recession in next two years, say economists Bundesbank warns of recession risk for Germany

  • 2020-02-10 05:19:43
  • Reporter

A majority of economists expect a US recession in the next two years, but have pushed back the onset amid Federal Reserve actions, according to a recent survey. Meanwhile, a Bundesbank report warned that Germany could be about to tip into recession, adding to the pressure on policy makers to ramp up support. The National Association for Business Economists (NABE) found far fewer experts who now think the next recession will start this year as compared to a survey in February. NABE conducted its policy poll as Trump put the Fed under constant attack, demanding more stimulus, but before the central bank cut the benchmark lending rate on July 31. However, the Fed was already sending strong signals that it intended to pull back on the rate increases made in 2018 due to concerns starting to dog the economic outlook, including the trade war with China. German output The Bundesbank said in its monthly report that German output will remain lacklustre in the third quarter and could continue to fall slightly. That would be a second straight quarter of contraction — the typical definition of a recession — after a 0.1% decline in the April-June period. The prognosis follows weeks of worse-than-expected German data and meagre corporate earnings reports. That has dragged down the rest of the euro area and prompted the European Central Bank to consider extra monetary stimulus. The government has also signalled that it might be willing to step up spending should the crisis worsen. The Bundesbank cited persistently weak momentum in industry as a reason for the continued weakness, and said it’s unclear whether domestic demand might take a hit as well. Stimulus measures The German government is getting ready to act to shore up Europe’s largest economy, preparing fiscal stimulus measures that could be triggered by a deep recession, according to two people with direct knowledge of the matter. The programme will be designed to bolster the domestic economy and consumer spending to prevent large-scale unemployment, said the people who asked not to be identified because the discussions are private. Similar to bonuses granted in the 2009 crisis to prod Germans to buy new cars, the government is studying incentives to improve energy efficiency of homes, promote short-term hiring and boost income through social welfare, the people said. Bunds extended declines while the Euro briefly rose as much as 0.2 per cent to $1.1114 before slipping back.

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