IHS Markit economists are forecasting a distinct slowdown in the U.S. Economy over the next few years. US Economist Joel Prakken, and Executive Directors Patrick Newport and Ben Herzon provided the following analysis in their February US Economic Forecast Flash forecast:
Fourth-quarter GDP growth was reported at 2.6% in the Bureau of Economic Analysis' “initial” estimate, 0.2 percentage point above our prior forecast. This left 2018 growth at 3.1% (fourth quarter over fourth quarter), a rate of growth boosted by tax cuts and spending increases.
But growth is forecast to slow to roughly 2% over 2019 and 2020, as the boost from fiscal stimulus first peaks and then fades. In the very near term, GDP growth slows sharply, to 1.3% in the first quarter. This mainly reflects a sharp, but temporary slowing in the growth of consumer expenditures stemming from weak spending in December (imparting bad momentum to the first quarter) and a reversal of a weather induced surge in spending on utilities late last year.
After 2020, GDP growth is projected to ease further to a 1.7% annual average through 2023 while the unemployment rate, after bottoming out at 3.5%, is forecast to drift higher — a profile that we think balances the risks between an outlook of continuing trend growth and an outright recession. Financial conditions have improved of late, with equity values starting off this month’s forecast about 5% higher than last month, and with both term and risk spreads starting somewhat lower. Core consumer price inflation (based on the personal consumption expenditures, or PCE, index) is forecast to rise to a peak of 2.2% (on a four-quarter change basis) by 2020, where it is expected to remain over the balance of the forecast.
Click on the Green Box below to see IHS Markit's forecasts for key economic indicators through 2022.