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• Mar 15, 2019

On Thursday, March 14, TD Economics published its Quarterly Economics Forecast, entitled "Global economy: Peak Uncertainty." Below is a summary of the U.S. portion of that report.

U.S. Economy Slowing, but Resilient

Economic activity decelerated at the close of 2018, but remained on steady footing at 2.6% in Q4. For the year as a whole, the economy likely expanded by 2.9%. These estimates remained consistent with our December forecast cycle.

The 2019 quarterly GDP pattern carries through a softening trend. This has been a main feature of our forecast for some time, as fiscal and monetary stimulus wanes. The 2019 forecast is tracking a tad softer than in December, at 2.4% (with Q1 carrying an extra weight from the government shutdown). Real GDP in 2020 is projected to be 2.0%, as fiscal stimulus shifts to fiscal drag.

Consumer spending has been a pivotal source of strength in 2018, despite December weakness due to a perfect storm from equity volatility and the government shutdown. Persistent strength in the job market still offers upside risk in this area of our 2019 consumer forecast profile.


In contrast, slower global growth and softer business confidence will manifest in softer business investment in our upcoming forecast. Likewise, housing investment has remained soft, as we expected. The recent drop in mortgage rates should offer a helping hand.

Fiscal policy has not left the landscape as a downside risk. Although a second government shutdown has been averted, a bigger hurdle will present itself at the end of 2019, when Congress needs to reach a new spending deal. The alternative would result in damaging automatic spending cuts taking effect. All else equal, this would significantly compromise our 2020 real GDP growth estimate, bringing it to 1.3%. Given recent difficulties within Washington in agreeing to funding levels for the current fiscal year, this risk is as important as ever.

In the wake of a larger diffusion of softening economic momentum across countries and persistent downside risks, the Federal Reserve has shifted to a wait-and see stance. We removed rate hikes from our forecast, and any further move is highly conditional on solid economic momentum ultimately feeding into higher inflation expectations, which is currently lacking.

Read the full Global Quarterly Economic Forecast from TD Economics

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