Question

After a dismal start to 2019, the U.S. economy seems to be speeding up in the spring. Growth has appeared to speed up towards the end of the 1st quarter, and after such signs, economists have been ratcheting up their estimates for 1st quarter GDP. Positive areas include a resurgence in consumer spending, a declining U.S. trade deficit, and a solid labor market.

Does the United States economy seem to be safe from a recession in the near future?

Answer 1

The United States economy has been on a steady growth path and the following points are likely to ensure that the economy is safe from recession in the near future -

1. The Federal Reserve has paused on interest rate hikes. The implication is that with no further tightening of monetary policy in the foreseeable future, investment and consumption spending is likely to remain healthy at relatively low interest rates. In addition, subdued inflation ensures the purchasing power to households increases and the consumption spending boom sustains. The focus is on consumption spending since it drives nearly 70% of GDP growth.

2. In their economic projections, the Federal Reserve expects real GDP growth of 2.1%, 1.9% and 1.8% for 2019, 2020 and 2021 respectively. I agree with this forecast considering the fact the unemployment is at multi-year lows of 3.8%, US business spending increasing and with consumer confidence bouncing back for April 2019.

3. There are ongoing talks and discussions related to the trade war. In particular, between the United States and China. With the trade war impacting both countries negatively, it is likely that a resolution will be seen soon and that can trigger higher global economic confidence and growth.

Considering these factors, it is unlikely that the United States will face a recession in the foreseeable future. As predicted by the Federal Reserve, economic growth is likely to remain stable and a sound financial sector will continue to promote growth.