Despite China Trade Tensions, Economists Expect Continued US Growth in 2019

Despite China Trade Tensions, Economists Expect Continued US Growth in 2019

The US will continue to enjoy positive economic growth in 2019, though it will be somewhat slower than last year. “We’re going to continue to grow, but the pace of moving forward isn’t going to be as great,” said Mike Walden, an extension economist at NC State University. Harry Davis, longtime economist for the NC Bankers Association, was more specific. He expects the real rate of economic growth to be around 2.7% in 2019, compared to its 3% expansion in 2018. “I think we’ll get through 2020 without a recession,” Davis said.

 

Walden and Davis made their comments at the annual Economic Forecast Luncheon organized by the NC Bankers Association and the NC Chamber. Over 1,000 attended the January 4 event in Research Triangle Park.

 

Eugene Flood, managing partner at Washington, DC-based Next Sector Capital, anticipates even slower growth while remaining attentive to signs of higher inflation. His forecast is for 2.4% GDP growth in 2019, falling to 1.9% in 2020. “The consumer is hanging in there,” said Flood, who holds a Ph.D in economics. As an advisor to investors, Flood focuses on what he expects the Federal Reserve will do – not what he thinks the Fed should do. “The Fed has a dual mandate to watch growth and inflation,” he explained. Higher prices due to tariff hikes could push inflation above the Fed’s 2% target to as much as 2.4%. “That means they’re going to tighten again in 2019,” Flood said.

 

China and possible Fed actions also are concerns of Davis and Walden. “We’re at a stage in the business cycle where it’s almost impossible for the Federal Reserve to please everyone – or sometimes even anyone,” Walden said. Davis was more critical. “The Fed always over-shoots,” he said. “I think they should sit tight until this summer.” Both anticipate the US and China will soon iron out their differences on trade. “I’m expecting a deal, and I think that’ll be very positive for the [stock] market,” Walden said. The Chinese economy has felt the jolt of trade tensions more than that of the US, Davis said. “It’s hurting them far more than it’s hurting us,” he said. “Their stocks are in a bear market now.”

 

Emma Turner, an economist for the NC General Assembly, said state analysts enter economic forecasts into their revenue models in order to gauge changes in tax collections. The recent drop in personal tax rates from 5.49% to 5.25% and a rise in the standard deduction to $20,000 could eventually impact North Carolina’s $23.9 billion budget. “Revenue has continued to grow despite these tax cuts,” Turner said. She also monitors the China talks and the economic performance of the state’s major trade and financial partners. “The international stage is very important,” Turner said. “It all feeds into economic growth in North Carolina.”