SIFMA’s 2019 End-Year US Economic Survey forecasts US GDP growth for 2020 at 1.8%, down 0.1% from the June Survey.

SIFMA’s bi-annual survey compiles economic focus from its Roundtable members, the chief US economists of over 20 global and regional financial institutions.

“Despite the markdown in 2020 GDP growth, the economy still expected to expand at a moderate pace,” said Ellen Zentner, a Managing Director and Chief U.S. Economist for Morgan Stanley. She is also the chair of SIFMA’s Economic Advisory Roundtable.

According to the survey, there still remained a 25% probability of a recession in 2020. However, for 2021, the probability was lower slightly at 40%.

SIFMA survey: Factors that impinged on growth

The economists considered various factors that could have an impact on the growth forecast. These included US trade policy, business confidence, private credit market conditions, geopolitical conflicts, Chinese economic conditions and US monetary policy among others.

Economic indicators

In 2020 the SIFMA survey members expect the unemployment rate to rise slightly to 3.7% from 3.6% in 2019.

The average monthly change in non-farm payrolls, a measure of employment growth, may turn down further to 139,000 from 160,000 in 2019.

However, inflation is forecast to shift higher to 2.1% in 2020 from 1.5% at the end of 2019.

Growth in consumer spending is forecast at 2.6% at the end of 2019, then decline to its long-term trend around 2.1% in 2020.

Fed trajectory

About half of the respondents in SIFMA’s survey think the Fed’s next strategy will be to increase rates, 44% think that the Fed will shift lower and 6% think the central bank will hold rates in the near future.

Inflation considerations followed by labor market conditions are front of mind factors for the Fed in its decision-making.

Interest rates

Respondents expect the Fed funds rate to decline to 1.625% through 1Q20 and thereafter to 1.620% by 4Q20.

Two-year U.S. Treasury’s may fluctuate in the range 1.53% to 1.600% in 2019 and 2020

10 year US Treasuries will move up from 1.715% in 2Q20 to 1.85 percent in 4Q20.

The 30-year mortgage is likely to trend up from 3.655% in 1Q20 to 3.775% in 4Q20.

SIFMA: US-China trade

64% of the respondents in the survey believe that a final China trade deal could bump up GDP by 0 to 20 basis points. However, 21% believe that it would have no impact while 14% feel that the deal could raise GDP beyond 20 basis points.

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