Bernard Baumohl, chief global economist for the Economic Outlook Group, warns there are several worrying signs for the fate of the overall economy and hoteliers would be wise to plan for a recession.
“The concern I have is we’re beginning to see the seeds of a much more significant slowdown in 2019 and 2020,” he said.
Baumohl admitted though that recent history has proven the difficulty of making economic projections in an unpredictable environment.
“Right now we’re in a pivotal moment in U.S. and world economic history,” he said. “There will be a lot of textbooks written about what’s happening right now. It’s really extraordinary. It’s difficult for economists to project what spending will be over the next two years, and part of that is that the models we use are incredibly ill-equipped to handle the impulsive decision-making and convulsions taking place right now.”
He said at the beginning of the year the global economy looked like a well-oiled machine, spurred to further growth by the U.S. tax cuts put into place in late 2017. But that changed when “someone threw a massive wrench” into that machine in the form of a rash of tariffs incited by U.S. President Donald Trump.
“For all practical purposes, we’re now in a trade war, and that will obviously have an impact on the economy,” Baumohl said.
Signs in the market
In addition to back-and-forth tariffs, other potential bad omens for the economy include the ongoing investigation into Russian interference in U.S. elections and record levels of both household and government debt.
Baumohl said the level of household debt can be a particularly worrying sign for hoteliers that rely heavily on discretionary spending.
“If consumers decide at some point to reduce indebtedness, by definition that means there is less money available for spending,” he said. “That’s something to watch carefully.”
