Below trend growth to continue
US-China trade dispute a headwind to growth.
We continue to expect that US economic growth will slow over the rest 2019, following a period of strong growth over 2018 and early this year.
This view is based on a fading impact of last year’s fiscal stimulus, the lagged effects of past tightening in monetary policy (and the market turbulence late last year), as well as supply constraints (the unemployment rate is at a fifty year low). The intensification of the US-China trade dispute (disappointing expectations of a resolution) is another headwind.
Early indicators for Q2 are consistent with this view. The ISM business surveys point to a slowing in activity. This is particularly so for the manufacturing sector, which is relatively trade exposed and is therefore feeling the impact of trade disputes, a global slowdown in manufacturing and a high USD. The service sector ISM survey has also softened, but not quite to the same extent.
For further details please see the US economic update May 2019.
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