The U.S. economy slowed in 2019 to an estimated
2.3%, down from 2.9% in 2018. Interest rate hikes and
a shrinking balance sheet from the U.S. Federal Reserve
(Fed) coupled with the diminished fiscal benefits from
the 2017 tax cuts would have been enough to slow
the expansion. However, President Donald Trump’s
escalation of the trade war with China and tariff threats
toward other major trading partners — including the
European Union (EU), Canada, Mexico and Japan —
further pressured the economy. Our view for some time
has been that trade poses the biggest threat to both U.S.
and global growth. We anticipate Trump wants to claim
victory on trade to strengthen his 2020 re-election bid.
The phased agreement announced in December may
give him that opportunity. The deal, which still needs
to go through the legal process, appears to include some
tariff relief and commitments from China to purchase
Global GDP growth sees lift in 2020
Source: Ivy Investments. Chart shows 2019, 2020 forecasts of annual gross domestic product (GDP)
growth, all based on purchasing power parity. Past performance is not a guarantee of future results. The
GDP growth forecasts are current through December 2019, and are subject change at any time based on
market and other conditions. No forecasts can be guaranteed.
We forecast U.S. GDP growth will be unchanged in 2020
and average 2.3%. However, this masks the underlying
trend in the economy. Economic growth weakened
throughout 2019 because of trade uncertainty, which
further hampered business confidence and caused
companies to pull back on capital expenditures. The CEO
Economic Outlook Index, a composite of CEO expectations
for capital spending, hiring and sales over the next six
months, showed declines in all three measures through
fourth-quarter 2019. It marked the seventh straight
quarter in which the chief executives of the nation’s biggest
companies downgraded their view of the U.S. economy.
The view from Main Street businesses is somewhat more
upbeat. The Small Business Optimism Index rose in
November, marking its biggest month-to-month gain
since May 2018, according to the National Federation of
Independent Business. Seven of the index’s 10 components
improved and small business owners said they added jobs at
the highest level since the spring.
In addition, consumer spending — the key driver of the
U.S. economy — continued to grow at a reasonable pace
throughout 2019 and housing activity ticked up in the latter
part of the year. We expect the cadence of growth to improve
through much of 2020 on better business investment and
housing activity and believe growth in consumer spending
will continue at a solid pace.
2020 global outlook — Poised for a rebound?
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product. The opinions are current through December 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed.
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