Is Housing The Spoiler For The US Economy In 2019?

Yesterday’s scheduled release of US gross domestic product (GDP) for the fourth quarter is still a mystery, courtesy of lingering effects of the partial government shutdown that ended last week. The good news is that whenever the Bureau of Economic Analysis publishes the data (the date remains “to be determined”) the results are likely to show that the expected slowdown in Q4 growth was moderate. The question is whether the trend will continue to decelerate this year? The jury’s still out, due to limited 2019 data published so far.

Let’s start with the current profile for GDP in Q4.  The median estimate for a set of nowcasts compiled by The Capital Spectator is still holding at a 2.9% increase (seasonally adjusted annual rate) for the final three months of 2018. That’s unchanged from last week’s estimate (published on Jan. 25). That translates to a moderately softer gain vs. the 3.4% increase in 2018’s Q3 and Q2’s strong 4.2% rise, but for now, it appears that a moderate growth trend prevailed at the end of last year.

For this year, a new survey from The Wall Street Journal indicates that the deceleration in output will continue in Q1. Economists are currently projecting that growth will dip to a relatively weak 1.8% in the first three months of 2019, the Journal reports via a poll this week.

The Federal Reserve appears to be downsizing its economic expectations, too, by putting rate hikes on hold and advising that it will be “patient” with future policy tightening if any. “We are now facing a somewhat contradictory picture of generally strong US macroeconomic performance alongside growing evidence of cross-currents,” Fed Chairman Jerome Powell said in yesterday’s press conference. “Common sense risk management suggests patiently waiting for greater clarity.”

Meantime, yesterday’s January report on private-sector payrolls via ADP paints a brighter profile. US companies hired 213,000 workers this month, a solid gain that translates to a strong 1.9% year-over-year increase. The upbeat data implies that tomorrow’s official jobs report from the Labor Department for January will deliver encouraging results too.

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