WASHINGTON (BLOOMBERG) – White House economic adviser Larry Kudlow, dispatched to the airwaves as US stocks tumbled, said he disagrees with the view of Goldman Sachs Group analysts that the economy will slow down soon.
The director of the National Economic Council, speaking to several news outlets on Tuesday (Nov 20), said business investment – one of the main targets of President Donald Trump’s tax reductions – was a “little soft” in the third quarter but is “booming again”.
As for consumers heading into the holiday shopping season, he cited rising incomes and called the future for the world’s largest economy “great”.
While he spoke, equity investors placed bets on a less cheery outlook.
The S&P 500 Index briefly slid 10 per cent below its record close and the Nasdaq Composite Index erased its gain for the year.
In a Nov 16 research note, Goldman Sachs predicted growth next year will slow to 2.5 per cent from 2.9 per cent this year, and decelerate further to 1.6 per cent during the presidential election year of 2020.
Kudlow repeated a White House official’s criticism of the “partisan” forecast by the investment bank where Treasury Secretary Steven Mnuchin and former Trump economic adviser Gary Cohn once worked. He said the Trump administration sees the strong expansion continuing.
“My personal view, our administration’s view, the recession is so far in the distance you can’t see it,” Kudlow said.
Kudlow’s call in the face of swooning stocks is on the optimistic end of the range of economists’ forecasts for an economy likely to reach a record-long expansion in mid-2019.
The most recent Bloomberg survey of 45 economists showed the chance of a recession in the next 12 months at 15 per cent. The poll also showed expectations for growth this year to be 2.9 per cent, before slowing to 2.7 per cent next year and 2 per cent in 2020.
By many measures, Kudlow is right: With a hot job market and little worrisome inflationary pressures, the US economy is on solid footing for now. But recent weakness in housing and threats of a widening US trade war with China are casting doubt on whether the strength is sustainable.
Kudlow said that while Trump is “trying to inject a note of optimism” in trade talks ahead of his planned meeting with China’s Xi Jinping at the Group of 20 meeting, there won’t be any deal “unless it suits American interests”.
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