Economic growth will ease to 2.1 percent in 2019 and further moderate to 1.7 percent in 2020, according to the consensus forecast of the ABA Economic Advisory Committee today. This means that the current expansion will become the longest in modern U.S. history.
“A strong consumer sector and moderate business investment, along with full employment and rising wage growth, should sustain the expansion,” said EAC Chairman Robert Dye, chief economist at Comerica Bank. He noted, however, that the committee is closely monitoring several potential downside risks. “A range of developments pose threats, particularly cooling global growth, recent financial market volatility, ongoing trade tensions and political uncertainty,” he said. “However, if tariff tensions can be resolved it will boost business sentiment.”
The EAC — which is made up of 15 chief economists at some of the nation’s largest banks — said that it expects to see the national unemployment rate fall to a 60-year low of 3.5 percent by year-end. Other economic indicators — including household spending growth, purchases of durable goods and home price growth — are expected to hold steady or edge down slightly in the coming year. Dye added that the Federal Reserve “is likely to slow the cadence of rate hikes this year, and we expect no more than two 25-basis point increases.”
The committee estimated the chance of a recession in 2019 at 20 percent, rising to 35 percent in 2020, though members noted that the economy has been resilient against shocks over the past decade. “The strength of households and the banking sector will promote stability in the U.S. economy, despite the headwinds,” Dye said.