Economic Outlook

US Economic Outlook

The sturdy 4.2% annualized pace of GDP growth in 2Q18 is expected to mark the peak, though the US economy remains on solid footing. Forward looking indicators including consumer and business confidence, as well as manufacturing and services PMIs remain at unexpectedly high levels, and support our forecast of continued above-trend growth for the rest of 2018 and into 2019. The trade dispute with China remains in high gear. We expect this front in the trade war to escalate further in our baseline scenario, with additional tariff action in 2019, and no clear trigger for a near-term de-escalation, particularly as some of the drivers of the action are geopolitical in nature. However, the currently-estimated roughly 20 bps per year growth drag from the US-China spat is offset by sturdier-than expected confidence indicators, so our baseline GDP projections for 2018 and 2019 are unchanged.