United States: 2019 Macroeconomic Outlook

United States: 2019 Macroeconomic Outlook

January 25, 2019

The U.S. economy accelerated in 2018, and the visible strength of economic fundamentals in the U.S. may lead some to assume that economic growth in 2019 will match that of the preceding year. However, the U.S. economy faces a number of strengthening headwinds that appear likely to constrain growth in the coming year. In this 2019 Macroeconomic Outlook, Keybridge examines the headwinds, tailwinds, and uncertainties that the economy will face in the year ahead.

Related Documents: Key Insight – 2019 U.S. Macroeconomic Outlook

U.S. Economic News

U.S. Economic News

January 24, 2019

U.S. Economic Indicators

Initial jobless claims fell 13,000 to 199,000 last week. The four-week moving average fell 5,500 to 215,000. DOL Report

The Conference Board’s Leading Economic Index declined 0.1% to 111.7 in December. The slight decrease suggests economic growth may be peaking. Conference Board Report

U.S. News

The Wall Street Journal reports that Mario Draghi, President of the European Central Bank, warned that Europe’s economy faces mounting headwinds, shifting from a statement in December that said economic risks were broadly in balance. Draghi cited uncertainties around threats of protectionism, vulnerable emerging markets, and volatile financial markets as reasons for the change. WSJ

According to the Wall Street Journal, the Trump administration’s top economist, Kevin Hassett, said that the U.S. economy may not grow at all in the first quarter of 2019 if the partial government shutdown continues. Hasset maintains, however, that the economy should recover any lost growth when the government reopens. WSJ

Peter Wells from the Financial Times reports that US commerce secretary Wilbur Ross stated that the U.S. and China are still “miles and miles” from a trade deal. Ross cited structural reforms and an intolerably large trade deficit with China as key sticking points. FT

U.S. Economic News

U.S. Economic News

January 23, 2019

U.S. News

The Wall Street Journal reports that unconventional mortgages, once maligned for their role in the housing meltdown a decade ago, are becoming more common. Although lenders issued $34 billion of these “nonqualified” loans in the first three quarters of 2018 — marking a 24% increase from the same period a year earlier — industry executives claim they are far safer than their pre-crisis predecessors. WSJ

Chris Giles of the Financial Times reports that a group of representatives from emerging economies stated that the United States’ aggressive trade tendencies threaten the health of the global economy. The criticism, made by a former commerce minister from India, followed comments by Secretary of State Mike Pompeo that the U.S.-China trade relationship could be restored only if China met all U.S. demands. FT

According to the Financial Times, the Trump administration rejected an offer by two Chinese vice-ministers to travel to the U.S. this week for preparatory trade talks due to a lack of progress on key issues. The Trump administration has demanded both structural reforms to the Chinese economy and an end to forced technology transfers, two issues that could derail the talks and cause further volatility throughout financial markets. FT

U.S. Economic News

U.S. Economic News

January 22, 2019

U.S. Economic Indicators

Existing home sales decreased 6.4% to a seasonally adjusted annual rate of 4.99 million in December, and are 10.3% below year-ago levels. NAR notes that several consecutive months of rising inventory may contribute to a slowdown in home price appreciation, however there is still a lack of adequate inventory of lower-priced homes. NAR Report

U.S. News

Lingling Wei of the Wall Street Journal reports that China experienced its slowest pace of economic growth in nearly three decades last year with a growth rate of 6.6%. The author cites the trade conflict with the U.S as one of the primary headwinds, as the uncertain outlook for Chinese exporters causes companies to delay investing and hiring. WSJ

The Wall Street Journal reports that the IMF cut its forecast for world economic growth in 2019 from 3.7% to 3.5%, conceding that the global expansion has weakened. While a global recession may not be imminent, threats of high tariffs and stalling European economies have dragged on global growth prospects. WSJ

James Politi of the Financial Times writes that congressional Democrats have demanded changes to the new U.S.-Mexico-Canada Agreement (“USMCA”), setting up a potential clash with the White House and Republicans in Congress. Some Democrats have asked for stronger enforcement provisions for labor and environmental standards, while others have taken issue with the fact that steel and aluminum tariffs on Mexico and Canada remain in place. FT

U.S. Economic News

U.S. Economic News

January 18, 2019

U.S. Economic Indicators

The University of Michigan Consumer Sentiment Index slipped 7.6 points to 90.7 in the preliminary January reading, and is down 5.0 points on the year. The Index of Consumer Expectations declined 8.7 points to 78.3, while the Current Economic Conditions Index fell 6.1 points to 110.0. Report
 
Industrial production rose 0.3% in December (up 4.0% Y/Y), after increasing 0.4% (revised) in November.  
Capacity utilization edged up 0.1 point to 78.7 in November.  Fed Report

U.S. News

The Wall Street Journal reports that U.S. officials are considering de-escalating tariffs on Chinese imports to calm markets and incentivize Beijing to make deeper concessions in the trade war. Treasury Secretary Steven Mnuchin reportedly proposed the idea to advance trade talks and win China’s support for longer-term reforms. WSJ

The Financial Times reports that the U.S. government shutdown is an emerging headwind to growth, according to New York Fed President John Williams. Williams also stated that the strong global growth, fiscal stimulus, and accommodative financial conditions that all contributed to the U.S. economy are diminishing. FT

According to the Financial Times, the E.U. is prepared to lower tariffs on imported U.S. cars as part of a trade deal, but is also warning that the bloc will retaliate if Washington levies punitive tariffs on Europe’s auto sector. Cecilia Malmstrom, the E.U.’s trade chief, said the willingness to engage on the issue would depend on what the U.S. puts on the table in negotiations. FT

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