US economy won't enter recession in 2019: Mohamed El-Erian
The U.S economy is on track for solid growth this year, despite an expected sluggish first quarter, according to Allianz chief economic adviser Mohamed El-Erian.
“The first quarter is going to be lower—that’s unquestionable,” he told FOX Business’ Maria Bartiromo on Monday. “But I think looking forward 3 percent is attainable for this year.”
The White House Council of Economics Advisers Chairman Kevin Hassett, on Monday, said in spite of a poor first-quarter seasonal adjustment process over the last decade, he still expects 3 percent growth in 2019 due to capex spending.
“We are very bullish about this year we think that we are looking at about a 3.2 percent year,” he told Bartiromo on Monday morning. “We expect maybe the first quarter will be in the two’s but then after that it will bounce right back.”
But the Atlanta Fed’s GDPNow initial estimates showed growth of about 0.3 percent in the first quarter.
El-Erian said the government shutdown, spillover from market instability in the fourth quarter and a seasonally bad quarter are contributing to the pessimistic outlook. But between a household sector “bolstered” by a strong labor market and an business investment boom, it would be “difficult to generate a recession” within the next two years.
“The only thing that derails this economy is either a major problem outside in Europe—keep an eye on Europe,” he said. “Or a Fed policy mistake.”
El-Erian added that another pro-growth initiative would cement further growth in 2020.
However, El-Erian also warned that external factors could create headwinds. He expects below one percent growth in Europe in 2019.
“Think of Europe as a football team. Your five top players: The U.K., France, Germany, Italy, Spain are all problematic. None of them can implement pro-growth policies,” he said. “In addition, the team as a whole has no team work left. So it’s very difficult to see them counter a slowdown that’s there.”
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El-Erian added that China’s economy is also showing warning signs.
“I don’t think China’s out of the woods yet,” he said. “So there will be headwinds coming from abroad which means we have to do our utmost to… keep this growth momentum going.”