The year 2019 began with an impressive 3.1% GDP growth in Q1 and plummeted to just 2% in Q2. The projections for Q3 by the Commerce Department were not very optimistic at 1.9%. However, the economy performed slightly better, at 2.1%. The performance is moderately better than estimated. Many economists have projected a weak estimate for the current quarter of about 1%-1.4%. Major reason behind the low projections is the ongoing US-China trade war. It has led to business cutting investments and inventories. The investments fell at a 2.7% annual rate in the third quarter. It was compensated by a 2.9% rise in consumer spending in Q3.
The manufacturing sector faced setbacks due to trade tensions. But it regained by 0.6% at the beginning of current quarter. In addition to that, the trade deficit has also narrowed. It went down by 5.7% to US$ 66.5 billion caused by a decline in imports as well as exports. Another weak zone of business capital spending also improved. Inflation in October was higher by 1.6% year-over-year. But it reduced by 1.7% than prior month. Not so critical inflation numbers make it unlikely that interest rates will be raised. Low-interest rates ensure more spending on investment. It has an impact on other factors like stock market and positive effect on the economy as a whole. The trade war between the behemoths US and China can be a detrimental factor if it remains unresolved.
The US economy grew by 2.9% in 2018. To surpass or at least equal the growth of previous year Q4 performance should be better than projected. But consumers drive approximately 70% of the economy. With the holiday season approaching, spending is likely to rise. Also, the unemployment levels are low to support the spending. Despite low projections, some analysts are optimistic about Q4. A decent 2019 will tell the story for a better 2020.