US: How likely is a recession in H1-2020? – Standard Chartered

Sonia Meskin, US economist at Standard Chartered, suggests that they have recently downgraded their GDP growth forecast on a weaker global growth outlook and the resultant risk to US corporate earnings (FOMC to cut policy rate in October; outlook dims).

“We fear that the H2-2019 slowdown in domestic business investment may worsen instead of stabilising. Based on historical correlations, deterioration in these indicators may presage slower hiring and weaker consumer spending. Weaker demand is spilling over into the US services sector and we worry about a broader slowdown in employment. For now, we expect slower growth, rather than recession, as Fed policy support may prove sufficient, absent a global growth shock. Stock valuations, corporate profits and the housing sector all benefit from lower domestic rates. Nonetheless, lacklustre global growth implies sluggish domestic investment, in our view. Large US corporates carry much more significant exposures to global dynamics than the US economy overall. We think that key prerequisites for a pessimistic US outlook would be persistently sluggish global growth and ongoing trade tensions. Key upside risks would be significant fiscal stimulus from major partners (e.g., the EU and/or China) or solid progress in ending US-China trade tensions.”