Tariffs Aside, How is the Rest of the U.S. Economy Performing?
June 3, 2019
By Krista Biernbaum, CFP®
Securities Analyst II
Trade talks remained in the day-to-day headlines last week. A lot of uncertainty surrounds trade and only time will tell how the situation unfolds. In the meantime, I want to shift the focus to talk about something different. It is reasonably safe to say that investors need a break from trade talks.
With that in mind, let’s focus on something positive this week: U.S. economic growth.
How is the U.S. economy doing in 2019?
For the first quarter of 2019, good. Last week, data released from the Commerce Department showed that the U.S. economy grew a revised 3.1% on an annualized basis during the first quarter. Not too shabby. The chart below from Bloomberg shows gross domestic product (GDP) for every quarter going back to 2015. The first three months of 2019 amounted to one of the strongest quarters of growth for our economy during this time period. While this level of growth is not likely to continue, it does show that the U.S. economy started out 2019 on a strong note.
Which factors drive economic growth?
The component of GDP which drives economic growth varies from country to country. For the U.S., it is the consumer. This is illustrated in the chart below from the Wall Street Journal’s Daily Shot®. The chart breaks down the components of GDP for each quarter from Q4 of 2014 though Q1 2019. The gray box in each quarter represents consumer spending. You will notice that consumer spending usually represents the largest part of U.S. economic growth. In fact, consumer spending accounts for more than two-thirds of our GDP:
A look ahead to the rest of 2019:
Okay, now we know that the U.S. economy started the year on a strong note, but what might happen for the rest of 2019? Economic growth is projected to slow from the 3.1% pace in the first quarter but remain positive for the remainder of the year. As of now, economists forecast the U.S. economy will grow about 2% for the full calendar year. Yes, this is a slowdown from 2018 but is in line with the average level of growth we have seen over the past several years.
In July, the current U.S. economic expansion will become the longest on record. At Security National Bank, we believe the U.S. economy can continue to move forward from here, as fundamentals remain positive. Keep in mind, that how trade talks play out over the next few weeks and/or months can affect global growth. (This is the only other time I will mention trade in my commentary, I promise.) Nonetheless, we will continue to remain fully invested and maintain a conservatively structured, broadly diversified portfolio as Mike Moreland noted in last week’s commentary.
If you have any questions or would like to discuss the U.S. economy in further detail, please contact an advisor today.