With 2018 being the poster child for economic growth, the market is enjoying the 3.5 percent GDP growth we have seen Q3 an 4.2 percent growth in Q2. However, 2019 is not looking as hopeful as this year as many analysts have forecasted GDP growth decline next year.
Goldman Sachs has made predictions that the United States economy will be slowing down in Q2, 2019. This statement comes as a result of the Federal Reserve continuing to increase interest rates. As interest rates rise, consumer and business loans become more expensive. Trade tariffs are also increasing, news which most companies have not welcomed.
Jan Hatzius, a chief economist at Goldman said this: “We expect tighter financial conditions and a fading fiscal stimulus to be the key drivers of the deceleration.”
The global economy is also forecasted to see GDP growth decline. 44 percent of surveyed fund managers at Bank of America said that they expect global growth to slow in 2019. The global challenges will add more strain to the U.S economy as trade becomes tighter.
U.S GDP Forecast
Goldman is expecting the U.S economy to grow by 2.5 percent in Q4 this year, which is 1 percent less that Q4, 2017. In Q1, 2019, analysts are expecting GDP growth to be 2.5 percent also. However, as times goes on, 2019 quarterly predictions are weakening. For Q2, GDP growth is expected to be 2.2 percent, 1.8 percent in Q3 and 1.6 percent in Q4.
This represents an expected decline in GDP growth in four consecutive quarters. Goldman Sachs is predicting GDP growth decline because if rising inflation rates. Inflation is forecasted to reach 2.25 percent by the end of 2019 thanks to increasing wages and tariffs. Despite growth expected to slow, the investment bank does not expect the GDP growth to reach negative anytime in the foreseeable future.
On the contrary to Goldman’s future optimism towards the US economy, many other analysts don’t share the same hope. Larry Summers, the former treasury secretary during the Clinton Administration, claimed that there is a near 50 percent possibility of a recession before 2020.