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Societe Generale: 'Corporate-Profit Squeeze' to Spark US Recession in 2020

Societe Generale: 'Corporate-Profit Squeeze' to Spark US Recession in 2020
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Wednesday, 20 November 2019 12:24 PM

Economists at Societe Generale SA are sticking with their outlier view that the U.S. will enter a recession in the middle of 2020, even after the expansion’s durability dashed the bank’s prior predictions of a downturn.

“The U.S. recession is in our view likely to be a relatively short-lived affair, with negative growth expected to persist for only two quarters and sub-trend growth for four,” the economists led by Klaus Baader said in their 2020 outlook report, which was published on Wednesday.

An intensifying squeeze of corporate profits is seen driving the downturn, which would be the first since the financial crisis a decade ago and end the U.S.’s longest-ever expansion. Germany, Mexico and Switzerland are predicted to follow the U.S. into a recession although not the rest of the world.

The forecast is not one shared widely. In their own 2020 outlooks published in recent days, neither Morgan Stanley nor UBS Group AG saw such a slump next year. A model created by Bloomberg Economics puts the probability of a U.S. recession in the next 12 months at just 26%.

Societe Generale acknowledged its past predictions have fallen short. Its call for a U.S. recession stretches back about four years, with economists originally expecting a downturn to arrive in 2018 -- only to postpone that call as the election of President Donald Trump raised the prospect of a fiscal boost.

Since then, “over time our degree of conviction has grown,” amid signs of weakness in the business sector and auto sales, the economists wrote.

The recession outlook leaves the French bank expecting the U.S. to grow just 0.7% next year and for the Federal Reserve to resume cutting interest rates in March before reducing its key rate to a range of 0.5% to 0.75% by July, down from 1.25% to 1.75% now.

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Economists at Societe Generale SA are sticking with their outlier view that the U.S. will enter a recession in the middle of 2020, even after the expansion's durability dashed the bank's prior predictions of a downturn."The U.S. recession is in our view likely to be a...
societe, generale, forecast, recession
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2019-24-20
Wednesday, 20 November 2019 12:24 PM
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