Apr. 04 2019 — Was the 4.2% annualized GDP growth in the second quarter of last year as good as it gets for the U.S. economy? The data since then--particularly the disappointing December and January data--suggest so. Fourth-quarter growth was revised to 2.2% in the final figures from the Bureau of Economic Analysis (BEA) , after the disappointing December trade and construction reports.
Even worse, we believe growth in the world's biggest economy likely slowed dramatically in the first three months of this year, to just 0.8%--exacerbated by the federal government shutdown.
So, is this slowdown a soft patch--or quicksand?
We suspect the former. Economic data has begun to warm from the winter chill, with this expansion, at 118 months, likely to reach the record length of 121 months in July. A solid domestic economy supporting a healthy jobs market with higher wages is helping to propel an expansion that will become the longest ever if it continues until July. However, as the fiscal stimulus from the tax package and the Bipartisan Budget Agreement wane just as the cumulative effects of tighter monetary policy take hold, growth will almost surely slow. Trade disputes and government dysfunction in the U.S. and abroad, which the recent federal government shutdown demonstrated, will exacerbate this deceleration.