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Home / Business / Headwinds can be quickly transformed into the US economy after shaken start to New Year

Headwinds can be quickly transformed into the US economy after shaken start to New Year



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The US economy may have the wind in the back spring. It was not the case early in the new year.

There is no doubt that the economy is working through a tough stretch. The big question is whether it gets worse before it gets better.

Bet on growth on speed. The economy has repeatedly started a new year slowly since the United States left its last decline in mid-2009 and the growth has usually picked up in the spring.

The same pattern seems ready to reappear, and there may be early hints this week from the first group reports on how the economy performs in March.

See: MarketWatch Economic Calendar

The gross domestic product, the official scorebook for the economy, is likely to increase 1

.5% in the first quarter, according to the latest MarketWatch round of economists. Economists then see GDP accelerate to a 2.5% annual pace in the spring.

The main difference between this year and last? There are no major tax savings or expenses increasing on the pressure of power that is in Washington. The economy got a big boost last year through the generous hand of Congress and the White House.

Read: Prescription drug prices do not rise – they fall for the first time in 47 years

Nevertheless, the economy does not suffer exactly from lack of support.

The Federal Reserve, for example, announced at the end of January it was scraping plans to raise interest rates anytime soon. It caused interest rates on business loans, mortgages and other consumer goods to thumb. Look for home sales especially to increase again.

stock market

DJIA, + 0.54%

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SPX, + 0.50%

meanwhile, has recovered from a harrowing plunge in December. Consumer confidence recovered after the market melting and partly public closure. And unemployment fell to 3.8% in February, reflecting the strongest labor market for decades.

A robust labor market, in turn, ensures that households will continue to drive the economy forward. Consumers have spent a little less than they have earned in recent months, but it is unlikely to last. Expenditure over time tends to track revenue gains very closely – and wages increase more than 3% a year.

"Remember that spending spending accounts for nearly 70% of US GDP," noted Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.

Read: Decline in the first quarter will not snowball into anything worse, says JPMorgans Feroli

The creaming on the cake can be an American agreement with China that solves a strained trade conflict that has put leaders on the edge and disturbed the economy of both countries. US corporate investment began to slow down slowly when the conflict warmed up last summer, and it has not fully recovered.

Read: Bill Gates finds an ally in Washington to tax robots: Alexandria Ocasio-Cortez

Even with the tailwinds in the back, the economy probably won't grow as fast as last year.

The Fed is expected to trim its forecast of 2.3% GDP in 2019 with a tick or two at its two-day meeting to look at the economy.

The United States expanded 2.9% last year to match a high recession.


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