Inconsistent Readings Reflect an Economy in Transition

We have consistently forecasted a slower year of U.S. economic growth in 2019. Last year’s stimulus measures are losing momentum, and downside risks are accumulating. The transition to a slower rate of growth is underway, and it is yielding economic indicators that can seem contradictory.

While certain measures have begun to cool, the economy is fundamentally sound. The job market is still performing well, inflation is steady and a patient Fed will leave interest rates alone for an extended period. These circumstances will support continued growth.

Influences on the Forecast

  • Real gross domestic product (GDP) for fourth quarter 2018 grew at an annualized pace of 2.6%, the start of a slower trend. For the full year, the economy grew at 3.1% after adjusting for inflation, in line with forecasts made by the administration when it introduced tax reform and deregulation measures. Those forecasts, however, projected a persistent pace of better than 3%, which we do not think will be realized.