Following a delay caused by the 35-day government shutdown, the US Commerce Department will today release its first estimate of GDP growth for the three months to December.
While US growth in the second and third quarters of 2018 was the strongest in four years, economists forecast that the economy slowed to 1.9% in Q4. This would drag annual growth to 2.2%. Fed Chairman Jerome Powell stated yesterday that the economy had stabilised on job production and wage increases, but warned that 2019 growth would be slower amid economic headwinds caused by trade disputes, housing, and manufacturing.
The Trump administration will likely place a positive spin on today’s report, using it as validation for his pro-business policies ahead of the 2020 election. However, significant uncertainties remain, including trade negotiations with China, ramifications from the shutdown and a potential no-deal Brexit.
Luckily for President Trump, GDP growth is a backward-looking metric. But should his administration fail to reach even a partial resolution with China, or should the shutdown cause a greater slowdown as economists predict, then today could be a foreshadowing of further hurt to come, which would undermine Trump’s economic narrative. The Commerce Department’s April 26 GDP growth estimate for Q1 2019 will provide further indication.
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