US Economic Outlook – 6 Dec 2019

We maintain our baseline outlook of a slowdown in US GDP growth to 2.3% in 2019 and 1.6% in 2020. Trade tensions remain elevated despite the currently holding détente between the US and China. Although tensions between the two countries have not escalated over the past month, indicators around the potential success of the Phase One negotiations continue to ebb and flow without any clear signals. The recently signed Hong Kong support bill and the potential legislation to condemn human rights violations against China's Muslim Uighur minority complicate the trade talks. Meanwhile, the Trump administration has proposed a new set of tariffs on USD 2.4 billion goods from France in retaliation of the recently enacted French digital tax law, and threatened steel tariffs on Brazil and Argentina. Amid the trade uncertainty, manufacturing remains in contraction and capex under pressure. With still-tight labor markets and moderate wage growth, consumer spending continues to drive overall activity, but we expect the pace of consumption to slow next year. Consistent with our somewhat below-consensus growth expectations is also the unchanged projection for one more Federal Reserve rate cut in 2020, and low long bond yields.

Key takeaways

  • Our baseline scenario of slowing GDP growth but no recession in 2020 is unchanged.
  • Trade war remains the #1 risk to the global economy.
  • We still expect one more Fed rate cut next year and long bond yields to remain low.


Economic Outlook US Economic Outlook - 6 December 2019