US financial development resilient amid international headwinds — analysts

A smaller fourth-quarter slowdown than feared ought to reassure traders over US financial development in 2019 amid uncertainty over commerce and the worldwide outlook, in keeping with economists and market strategists.

The commerce division on Thursday revealed that gross home product (GDP) grew at an annual fee of two.6 per cent within the fourth quarter, in keeping with an preliminary estimate. Whereas markedly slower than the three.four per cent rise seen within the third quarter, and the second quarter’s blockbuster variety of four.2 per cent, development within the remaining three months of 2018 was higher than the common forecast of two.three per cent.

For the total yr, GDP development stands at 2.9 per cent, up from 2.2 per cent in 2017. It was additionally the primary yr since 2004 to indicate GDP development of no less than 2 per cent in every quarter, in keeping with Bespoke Funding Group.

James Knightley, chief worldwide economist at ING, stated non-residential funding helped decide up the slack within the fourth quarter as different indicators softened. Shopper spending additionally proved resilient, he added, increasing 2.eight per cent regardless of market turmoil throughout the quarter and a shock drop in December retail gross sales.

“This isn’t a nasty end result in any respect,” he wrote in a be aware to purchasers.

Charlie Ripley, senior funding strategist for Allianz Funding Administration, stated information on spending point out the US shopper is “alive and nicely.”

“Total, with expectations pretty low going into this report, this was a constructive shock that ought to reinforce the general well being of the US economic system for traders,” Mr Ripley added.

Financial development within the vary of two per cent to 2.5 per cent “seems to be doable” for the primary quarter of 2019, Mr Knightley stated, given the tip of the US authorities shutdown and a greater backdrop associated to monetary markets and commerce:

By way of the outlook for the primary quarter, issues look to be in first rate form regardless of the disruption from the federal government shutdown. Employment development is powerful and wages are accelerating, which ought to help shopper spending. Fairness markets have rebounded sharply, recovering the October-December losses, whereas gasoline costs stay subdued, serving to to spice up family actual disposable incomes. The commerce truce can also be a constructive improvement, however clearly a concrete deal within the coming months that might result in a transparent de-escalation of US-China tensions could be superb. Imports might reverse after the surge in 2H18, however inventories are additionally more likely to be run down for a similar cause. senior financial analyst Mark Hamrick stated the outlook for 2019 seems extra muted attributable to fading international development and fewer stimulus from President Donald Trump’s 2017 tax cuts. Nonetheless, the fourth-quarter studying “provides some reassurance” after December’s market sell-off and suggests “solely a modest damaging impression from the partial authorities shutdown.”

“The US economic system wasn’t so dangerous within the remaining months of final yr in any case. Actually, it appeared fairly good total,” Mr Hamrick stated.

“If something, the This fall estimate, topic to revision in a month, ought to assist to consolation the Federal Reserve from the standpoint of worry of a extra substantial near-term downturn. The US economic system was removed from contraction within the remaining three months of the yr.”

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