S&P Global Ratings is projecting higher chances of a U.S. recession as fewer leading economic indicators remain in positive territory, suggesting that growth momentum is fading.
The rating agency said the risk of a recession in the next 12 months now stands at 30% to 35%, up from a range of 25% to 30% in the previous quarter.
Only three of the 10 leading indicators monitored by S&P Global Ratings are positive — consumer sentiment, jobless claims and the Chicago Fed National Financial Conditions Index — with four neutral and three negative. Five were positive in May, and seven were positive in August 2018.
"[T]he leading indicators combined with the dispersion of sectoral drivers of growth in activity within the economy suggest elevated odds of a weaker growth in the coming six months," the rating agency said, warning that a slowdown in the industrial sector may soon spread to the services sector.
In addition, the recent inversion of the government bond yield curve is "undoubtedly raising a red flag for a potential downturn," according to S&P Global Ratings.
"The rise in uncertainty on trade policy and global development has the bond market becoming more pessimistic about growth prospects over the next year, and possibly beyond," the rating agency added.
Fresh U.S. tariffs of 10% on another $300 billion in Chinese imports, if pursued, would likely knock 10 basis points to 15 basis points off U.S. GDP growth in 2020, the rating agency warned.