Here's an interesting economic snapshot that IHS' Prakken, Newport and posted this week:
GDP growth was reported at 3.5% in the Bureau of Economic Analysis' second estimate for the third quarter, unrevised from the advance estimate. However, the composition of third-quarter GDP was less supportive of growth going forward, as final sales were revised lower and inventory investment was revised higher, according to Source: IHS Markit December US Economic Forecast Flash. Furthermore, data in the interforecast period led to a similar degradation in the growth profile of fourth-quarter GDP (less final sales, more inventory investment).
The reduced near-term momentum, along with an assumed slower ascent of housing starts to a 2022 peak, were mainly responsible for lowering our forecast of GDP growth for 2019 by 0.1 percentage point to 2.3% (fourth quarter over fourth quarter) and raising our forecasts of GDP growth for 2021 and 2022 by 0.1 percentage point each to 1.6%.
Unexpected weakness in core personal consumption expenditure (PCE) inflation in October, a removal of the previously assumed step-up to 25% of the tariff rate paid on $200 billion of imports from China, and a materially lower path for oil prices lowered our core PCE inflation forecast by 0.2 percentage point over 2018‒19. We still expect core PCE inflation to overshoot 2.0% by a couple tenths of a percentage point. Reduced GDP growth and somewhat lower inflation in the near term led us to assume a somewhat more gradual path for Federal Reserve interest-rate hikes beginning in the second half of next year.
Click on the green box below to see the table.