A global economic recession could bearound the corner. The International Monetary Fund, JP Morgan CEO Jamie Dimon, and analytics firm Moody’s Analytics allseem to believe that a recession is inevitable.
Recent data out of the US also indicates thatthe economy is losing its wheels, but Nobel laureate Robert Shiller believes that President Donald Trump’s policies couldhelp us stave off the next financial crisis.
Robert Shiller is singing a different tune about Donald Trump’s effect on the economy
The Nobel-prize winning economist’s comments about Trump’s policies turning out to be a savior for the US economy might seem surprising. In January 2017, Shiller believed that Trump could trigger the next recession in America and send the stock market into a tailspin after an initial boom.
But he is singing an entirely different tune now. Shiller told CNBC in an interview that Trump’s motivational speaking skills are inspiring Americans to keep their wallets open and boost consumption:
“I think that [strong spending] has to do with the inspiration for many people provided by our motivational speaker president who models luxurious living.”
However, Shiller did point out that the US economy is not in the clear just yet. The economic uncertainty is still there and it is compounded by the impeachment inquiry against Trump, which he believes is the greatest threat to his forecast that the President could keep a recession away.
Shiller also adds that if Trump manages to overcome the inquiry, he has got a nice shot at re-election. A second Trump presidency could galvanize the markets and keep the recession away for another three years, believes Shiller.
“ Let’s not make the mistake of assuming it’s right around the corner, ”Shiller said. “If the economy is strong, which is what he built is case on, ‘make America great again,’ he has a good chance of getting re-elected.”
This is another about-turn from the economist, who recently said that there could be a recession in 2020.
Are Shiller’s claims credible?
It seems like Robert Shiller is counting on Donald Trump’s rhetoric to save the US from an economic recession. But a closer look at consumer confidence data suggests that he may be off the mark here.
Reuters reports that U.S. consumer confidenceplungedin September to a reading of 125 .1 from 134 .2 in August. Economists were expecting a reading of 133 .5, but the actual number missed that figure by a wide mark.
US consumers’ short-term outlook with respect to income, business, and labor market conditions also deteriorated – evident from a slide in the expectations index that fell to 95 .8 in September from 106. 4 in August.
The sliding consumer confidence is not surprising as the US-China trade war is weighing on the manufacturing sector.
US manufacturing activity fell to its lowest level in more than a decade, and this is probably one of the reasons why consumers have started losing confidence in the U.S. economy. Weak manufacturing could lead to loss of jobs and tepid wage growth, which will force consumers to become stingy.
Consumption would decline in such a scenario. As 69 percent of the U.S. GDPis driven byconsumer spending, economic growth will stall and a recession would seem inevitable. In that case, Donald Trump might not be able to save the U.S. economy from a recession because he seems to beenjoying the trade warwith China, and Robert Shiller’s prediction will stand defeated.
So don’t expect Trump to be the messiah that the US economy needs.
This article was edited bySamburaj Das.
GIPHY App Key not set. Please check settings