USA: Moderate GDP-Growth and Worsening of Perspectives

The GDP growth in the 1Q 2019 is estimated at a yearly 0,9% q/q. Employment figures continued to rise over the past months and unemployment receded to 3.8% in February. In the 4Q the GDP still grew by 2.6% y/y thanks to manufacturing production and private consumption as also reflected by retail sales data. Despite the impulse of tax reduction measures (1.5 Bio. $), during 2018 the economy was progressively hindered by a weaker global economy, trade tensions and budgetary disputes. The yearly foreign trade deficit increased by 18.8% in 2018.

The escalating tensions between President Trump and the Democrats in December triggered a 35-day “shutdown”, i.e. federal authorities and infrastructures were closed or at a minimum activity rate because of the lack of federal financial resources. Consumer’s confidence and unemployment rates (Feb. ‘19: 3.8%) temporarily worsened. The service sector’s PMI (Feb. ’19: 59,7 points) improved during 2019’s first two months, whereas the decrease ISM Manufacturing PMI-Index decrease (54.2) since August 2018 points to a slowing activity rate in this sector. According to the Small Business Association (NFIB) survey, most of the small and medium businesses do not foresee any business improvement. Investment plans are therefore reduced. The labour market remains tense and the hourly average wage continues to grow.

Considering the inflation trend until November and the strengthening of the labour market, the Fed raised the target range for its policy rate to 2.25–2.50% in December. However, consumer prices have recently decreased (Jan. 19: +1,6% y/y) to the lowest level in the last eighteen
months, mainly because of the energy prices’ contraction. The Fed stopped the increase of interest rates, which remain the half of their level before the financial crisis.

April 2019