Wall Street economists fret that plunging profitability is pointing to a downturn as soon as mid-2020. Thats mean that Donald Trump’s re-election bid could be derailed by a shock US recession.
Corporate profits in the US have been hit by climbing labour costs as wage growth picks up. The squeeze could lead to a damaging pullback in investment from businesses scrambling to protect profits, analysts have warned.
Societe Generale predicted that declining profitability will tip the US into recession in the middle of this year, while Goldman Sachs warned the economy is exposed by the earnings hit.
While most economists believe the US will only suffer a significant slowdown this year, rather than an outright contraction, company bosses are more pessimistic ahead of November’s Presidential election.
Almost half of US businesses have predicted that America will slide into recession this year, according to a Stenn survey.
Signs of recession would deal Mr Trump’s election chances a huge blow and could usher a left-wing president into the White House. Analysts believe Mr Trump’s approval ratings are propped up by US growth stretching into an 11th year.
Stephen Gallagher, chief US economist at Societe Generale, said: “Business investment has already suffered and the next step is employment.