US economic growth accelerated in 2018 in response to deregulation, tax reform, and moderate oil prices, but trade-policy concerns will suppress growth in the first half of 2019. That’s one of the key take-aways from Dr. Robert Fry’s presentation at the recent AIMCAL Annual Meeting in Palm Springs, CA. His “Economic Outlook” talk also emphasized how growth has slowed in the rest of the world – more than offsetting the US acceleration.
Still, Fry believes that the current US expansion could last a long time because slow expansions are long expansions. A dreaded housing bust can’t happen without first having a housing boom, which has yet to really materialize. And increased investment in response to tax reform would help ease inflationary pressure and extend the recovery.
Some other Curmudgeon bullet “points of interest:”
- Real GDP has grown at a 2.9% annual rate since Q1 2017, driven by faster industrial production and payroll employment rising by 206,000 per month over the past two years.
- Trump’s tariff actions on lumber, washing machines, steel, and aluminum have mainly only hit stock prices, mostly by increasing uncertainty. Threats of an escalating trade war caused businesses to put investment on hold.
- The slowdown in China predates US tariffs, due to demographics and debt; and European growth has been hurt by Brexit, populist politics, and reduced demand from China.
- Because we’ve not yet seen cyclical peaks in housing starts, corporate profits, or average hourly earnings, there is little evidence that we are late in a US economic expansion.
- Real GDP will likely hit 3.0% globally in 2020, with North America as 2.6%, Western Europe at 1.5%, and China at 6.0%.
- Industrial production in 2020 is forecasted at 2.1% growth in advanced economies, and 3.9% in emerging economies.
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