Updated: December 11, 2019
Economic growth may accelerate slightly in Q4, but will be moderate in 2020
We expect US Real GDP growth to come in at 2.0 percent for Q4 over Q3 and annual growth for 2019 to be 2.3 percent. While this rate is lower than last year’s 2.9 percent growth rate, we do not believe growth will dip below 2 percent in 2020.
The US Leading Economic Index declined for a third consecutive month in October and its six-month growth rate turned negative for the first time since May 2016. While the US economy could weaken somewhat over the coming months, the recent trend in the US LEI is still consistent with continuing albeit moderate growth in the US economy.
The drivers of growth next year will likely be different from those seen this year. The growth contribution from real consumer spending is likely to rise this quarter, but it will gradually weaken over in 2020. However, we expect improvements in business sentiment to bolster capital formation, which will help to offset softer consumer spending. Furthermore, a sustained improvement in housing authorizations and starts, supported by lower interest rates, indicates that residential investment will also provide a tailwind for the US economy next year.
Total nonfarm payroll employment for November came in well-above consensus and shows that tightness in the labor force is not abating. This job report, perhaps more than any other recent data, suggests that the US economy is not at risk of an imminent recession. The report will also significantly reduce the Federal Reserve’s appetite for additional interest rate cuts in the near-term.
The U.S. Economic Forecast
THE CONFERENCE BOARD ECONOMIC OUTLOOK, 2018-2019-2020
Percentage change, seasonally adjusted annual rates (except where noted)
* Actual Value