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The brakes were applied to the U.S. economy in the waning months of 2018 after speedy growth in spring and summer.
Will the U.S. finally show 3% annual growth for the first time since 2005? Maybe, but don’t bet the house on it.
The economy sped forward like a bullet train last spring and summer, but the main engines of growth faltered in the waning months of 2018. That might be enough to keep the U.S. from achieving 3% growth for the first time since President George W. Bush was early in his second term.
Economists polled by MarketWatch predict gross domestic product will slip to a 2% annual pace in the fourth quarter from 3.4% and 4.2% in the prior two quarters.
If they’re right, the U.S. will just fall short of 3% annual growth.
Although the 3% figure is largely symbolic, the Trump White House would love to top that mark to offer proof that its pro-business tilt is working. Administration officials have repeatedly vowed to generate 3% or even 4% GDP growth.
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The government will unveil its latest report card on the economy on Thursday, nearly a month later than usual owing to the recently ended partial federal shutdown. A slew of other reports that were also delayed are on tap.
The backlog is likely to show a drop-off in consumer spending, especially retail sales. Business investment also softened. Consumers and businesses represent the two biggest pegs in the U.S. economy.
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The good news is, GDP is always a look in the rearview mirror.
“We’ll get a lot of data but won’t necessarily learn a lot from it,” said chief economist Richard Moody of Regions Financial.
While the economy clearly slowed toward the end of last year, more recent evidence suggests that growth has stabilized.
Hiring soared in January, for instance, and layoffs have fallen back near post-recession lows. The strong labor market is likely to keep households spending at a steady clip and prevent business investment from falling off a cliff.
Another source of strength has been a huge rebound in the stock market DJIA, +0.70% SPX, +0.64% since a major selloff in December. The end of the 35-day government shutdown has also lowered anxiety levels.
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If the Trump White House can strike a trade deal with China soon that eases tensions, Wall Street and Main Street would have even more good reason to cheer.
Some evidence of improved optimism could come this week from the consumer confidence index in what could turn out to be the real highlight of the week. Confidence confidence took a dive in January to a one-and-a-half year low, but it’s expected to rebound in February.
Federal Reserve Chairman Jerome Powell is also likely to lend support to the idea of a steady-as-she-goes economy when he heads to Congress next week to offer his assessment.
The economy may have slowed when it came around the bend at the end of 2018, but it hasn’t gone off the rails. The U.S. is forecast to grow around 1.5% to 2% in the first three months of this year.
Not great, but not bad, either.
