Politics

The State of the US Economy for Q4 2019 – Meziechi Nwogu

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The US GDP growth, for Q4, may slow to 2.0% compared to 2.1% growth in Q3 2019.

The slowdown in 2019 is a side effect of the trade war with China and investment slump amid persistent trade uncertainties.

The US-China trade war and a weak global backdrop on investment will likely spill over into slower job creation and private consumption in 2020.

Hiring picked up in November as employers added 266,000 jobs, compared to 128,000 jobs in October. The job increase highlights a healthy US economy that has endured trade jitters with China, the European Union, and sluggish global growth.

The unemployment rate fell from 3.6% to 3.5%, a 50-year low.

Inflation will average between 1.7%-1.8%. The annual inflation rate in the US increased to 1.8% in October, up from 1.7% in September, due to the higher cost of food and medical care services.

The Federal Reserve, on October 30th, slashed its benchmark rate by 25%, to a range of 1.5% to 1.75%. The rate cut was the third in four months. The Fed will hold rates steady in December after reducing interest rates three times this year amid slowing growth, trade tensions, and volatile markets.

The US Manufacturing PMI for November was 52.6 in November, up from 51.3 in October. The reading points to robust export orders from domestic and foreign clients.

Impact on the Global Economy

Global growth has been weak, but the US economy remains resilient. If the US were to weaken and slide into recession, it would seal the deal on a global downturn. Thus the well-being of the US economy is of vital interest to global investors.

The uncertainty stemming from the US-China trade war is the primary reason for a weak global economic outlook.

The trade war has taken a toll on global trade, business confidence, industrial production, and export orders. It has hit export-oriented economies, like China, Europe, and Japan, the hardest.

Given the weak growth backdrop and high geopolitical risks, global central banks have slashed rates to stimulate economic growth and counter the adverse effects of the trade war.

The greatest danger to the worldwide economy is a further escalation of the trade war, which would lead to a deep recession in global manufacturing.


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