After a seasonally weak first quarter, expectations have been ramping up for the U.S. economy, which is experiencing its longest expansion since World War II. The first look at
The domestic economy has begun to reap the benefits of
Stronger consumer spending data is reflected in the Federal Reserve (Fed) Bank of Atlanta GDPNow forecast of
Continued strength in business spending should add to a healthy picture of the economy in the second quarter, as incentives for capital investment in the new tax law encourage companies to build out their infrastructure. Business spending has been accelerating since an
Trade tensions have dominated headlines recently. Tariffs on $49 billion in goods have already been implemented and tariffs on $200 billion or more of additional Chinese goods have been discussed, along with tariffs on automobiles. Anxiety around a global trade war has fueled a jump in U.S. exports ahead of tariffs, closing the trade deficit to its smallest point since 2016. Net exports averaged $144 billion in March, April
The positive impact on GDP from the increase in exports may just be borrowing growth from future quarters. A strong dollar may also weigh on exports by making U.S. goods more expensive abroad. Consumers benefit, however, from a strong dollar as it allows them to purchase imports more cheaply. The U.S. dollar has rallied to a 12-month high, reflecting the strength of the economy.
Tariffs over time are likely to raise price levels. There is anecdotal evidence that uncertainty around tariffs may be delaying business spending. Nevertheless, we estimate that tariffs would cause only a 0.1% to 0.2% drag on annual U.S. GDP if they do not extend meaningfully beyond current policy. The impact would be small when compared with the overall effect of
We expect U.S. GDP growth of up to 3% in 2018. Year-over-year GDP growth was 2.8% in the first quarter, implying a modest lift from current levels. Although we are watching the impact of tariffs closely, we expect that the benefits of fiscal stimulus may outweigh any negative implications, and the economy should be able to maintain a solid growth trajectory over the remainder of the year.
The views expressed are provided for information only and are not to be used or considered as an offer or solicitation to buy or sell securities or investment products. To determine which investment(s) may be appropriate for you consult your financial advisor.
• The economic forecast set forth in this presentation may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.
• Data provided by LPL Financial, Bloomberg
• All investing involves risk including loss of principal