Unsplash / David Everett Strickler
The United States is heading for another recession, most likely to happen by the end of 2020, according to two-thirds of American economists. According to a recent poll taken by the National Association for Business Economics, an overwhelming majority of economists believe the warning signs point to an economic downturn soon.
What are the economic factors?
There are several factors that trigger an economic recession. It happens when businesses slow down production and the unemployment rate climbs.
Other things that trigger a recession includes lowered housing prices, plus the country’s Gross Domestic Product (GDP) falls for two consecutive fiscal quarters. Economists track these indicators and can see when there’s a downturn.
Trade tensions trigger talk of inevitable recession in 2020
Many economists point to recent trade tensions as one of the leading indicators that the American economy may soon level out and then move toward recession. Trade wars between the U.S. and Europe, China and other international trading partners means tariffs on goods, which can raise the price on popular and common products.
When consumers stop spending because certain products cost too much, production decreases and companies lay off workers. With the government’s current approach to tariffs and trade wars, the effect on the economy long-term remains to be seen.
Rising interest rates put the brakes on too much growth
Economists also point toward recent actions by the Federal Reserve. In a slow economy, the interest rates start out low to encourage business and consumer spending. In a booming economy, the Federal Reserve raises interest rates to slow down inflation.
With several corrections in the last year alone, the Federal Reserve has already signaled its belief that a slowdown is necessary for the health of the nation’s economy. This means that today’s robust economy may be experiencing its first signs of decline in the coming months.