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Economic Forecasts

Good Third and Fourth Quarters, but Yield Sign Ahead

Kiplinger’s latest forecast for the GDP growth rate

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GDP 2.5% growth in '19, down from 2.9% in '18 More »
Jobs Unemployment rate will decline to 3.4% by end '19 More »
Interest rates 10-year T-notes at 3.0% by end ’19 More »
Inflation 2.2% in ’19, up from 1.9% in ’18 More »
Business spending Up 5% in ’19 as global growth slows More »
Energy Crude trading from $55 to $60 per barrel in June More »
Housing 5.35 million existing-home sales in ’19, down 0.4% More »
Retail sales Growing 4% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

Growth was a solid 3.4% in the third quarter following a strong second quarter gain of 4.2%. Fourth-quarter growth should also be good, around 2.8%. However, quarterly growth in 2019 will likely be much lower, leaving a yearly average of 2.5%, down from 2.9% in 2018. Consumer spending grew 3.5% in the third quarter and will likely grow more than 3% in the fourth quarter. A lower stock market could ding consumer spending in 2019, though income growth should still be strong because of low unemployment and lots of folks working. Government spending is still expanding at a good rate, and businesses are adding to inventories. However, business investment is slowing markedly because of the uncertain outlook. And housing is still reeling from higher interest rates.

Exports are showing little growth, likely because of the trade war with China. The added uncertainty could create knock-on effects that slow business investment plans, and the need to rejig supply chains will reduce productivity and increase costs.

Look for the Federal Reserve to hike interest rates twice more in 2019. The Fed is determined to achieve its “policy-neutral” federal funds rate of close to 3%. Federal Reserve Chairman Jerome Powell has indicated that rate hikes are likely to be paused or ended sometime in the year, however.

Source: Department of Commerce: GDP Data