The overheating economy could crash in 2019, this top forecaster says

A senior economist of the Raiffeisen Bank International Joerg Angele mentioned that the US economy is leaning towards a downfall, adding that he is extremely optimistic of the US economy in the medium term, but he fears that the growth is not sustainable, pointing to an overheating economy. The economy is growing much faster than its long-term potential rate of around 1.5%, with the rate of unemployment rate “way below” its long-term natural rate of around 5%, this being before the impact of tax cuts and budget stimulus hits. He mentions that the economy has “absolutely no need” for the additional stimulus of decrease in taxes and budget stimulus hits. He predicts the economy to grow at about 3% and the unemployment rate to drop from 4.1% to 3.5%. Angele claims that by the middle of 2019, the US economy will be at a sharp slowdown and perhaps even a recession. He compared this this to the scenario of 2000, when the economy grew 2%-3% above its natural rate, having a positive output gap and falling into a recession the following year.

Because of the overheating economy, he predicts that the Fed increase interest rates to cool the economy by increasing the opportunity cost to spend money rather save, thereby decreasing marginal propensity to consume. Angele mentions that he does not expect protectionism to have much of an impact on economic growth or inflation but a trade war with China would be harmful to the US economy.

https://www.marketwatch.com/story/the-overheating-economy-could-crash-in-2019-this-top-forecaster-says-2018-03-10