Note: This post is an excerpt from Gould Asset Management’s Economic and Market Review for the First Quarter of 2019. The excerpt is posted here for the benefit of our blog subscribers.
US Economy: Signs of Slowing, but Still Growing
The US economy decelerated in the fourth quarter, but still grew at a solid 2.2% annualized rate. Consumer spending—the largest component of GDP—was slow in January, but consumer sentiment is healthy and inflation pressures are low.
Hiring in the US bounced back in March following a weaker than expected February. The unemployment rate held steady at 3.8% and wages ticked up 0.1% last month.
Manufacturing growth faltered in February but rebounded in March as production, new orders, and hiring all picked up.
The housing market continues to be a mixed bag for the economy. Sales of new homes are weak and existing home sales were trending down before spiking higher in February. The 30-year fixed mortgage rate recently fell to its lowest point in over a year, which could make homes more affordable and possibly give a boost to this lagging area of the economy.
Fed Shifts Course, Signals No More Rate Increases This Year
The Federal Reserve held policy rates steady as expected in March and took the further step of putting future rate hikes on hold, a clear shift to a more dovish tone that reflects the central bank’s worsening outlook for global growth.
New economic projections paint a slightly dimmer picture compared to previous expectations. Fed Chairman Powell cited risks from abroad, including weakening economies, rising trade tensions, and Brexit.
Financial markets confirmed this assessment, with futures markets implying about a 60% chance of a rate cut in 2019.
Powell stressed that the economy remains in a good place. Strength in the labor markets and inflation near its long-term target of 2% are positive indicators for this year.
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