A combination of the China trade war and government shutdown could be enough to tip the US economy into recession this year, according to Torsten Slok, Deutsche Bank’s chief international economist.
The stark warning comes amid emerging signs that the world’s biggest economy is slowing down as gauges of manufacturing and consumer sentiment have fallen in recent weeks. Economists this month put the risk of a US recession at its highest in six years.
At the same time, the partial government shutdown continues with no public signs from President Donald Trump’s White House or Congress of any negotiations to end it.
“If the government shut down continues it could cause a recession,” Slok told Bloomberg Television’s Alix Steel and David Westin in an interview. “You could call it a technical recession, we are getting a lot of incoming questions about how do you quantify this risk.”
Analysts generally expect the partial government shutdown – which Trump said could last for months if not years, and is now in its fourth week – to weaken quarterly economic growth by 0.1 to 0.2 percentage points every one to two weeks it drags on.
“The uncertainty is intensifying and the more anecdotes that come out, the more worried you get,” Slok said.
There was a similarly cautious tone from HSBC senior economic adviser Stephen King, who told reporters in Hong Kong yesterday that the risks of a recession in the US are greater than normal.
“That is not a prediction, it is simply saying recessionary risks are going up,” he said.
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