What does the US economy expect in 2019

The US economy is turning - but there is no place for euphoria

In the first quarter of 2019, growth was surprisingly strong. But the pace will not be able to be sustained.

The US economy grew strongly in the first quarter of the year, according to an initial official estimate by the US authorities. Annualized, real gross domestic product (GDP) increased by 3.2% at the beginning of the year, after annual growth of 2.9% in 2018 and 2.2% in 2017.

Such a high value was not necessarily to be expected in view of the 35 days of the government shutdown, which lasted well into January, as well as the ongoing trade tensions, the slowdown in growth in the rest of the world and the volatility of the financial markets in the fourth quarter of 2018. Since the outlook has improved again in the meantime - the International Monetary Fund is expecting a slight acceleration in global growth from the middle of the year - the economic fears that arose in the USA at the turn of the year will for the time being vanish again.

It appears that the US economy and the Federal Reserve are making a soft landing after strong growth stimulated by expansive fiscal policy and a series of interest rate hikes in 2019. In May, the current economic upswing in the USA, which began in June 2009, should last for an incredible 120 months and catch up with the longest expansion of the post-war period to date, which lasted from March 1991 to February 2001.

But there is no place for growth euphoria. Traditionally volatile items such as inventory build-up by companies, higher exports and more extensive government spending at the local and state level contributed to the strong expansion in the first quarter, while consumer spending and capital investment, which were generally heavy, were rather subdued. This suggests that the US economy will continue to expand, but will not be able to maintain the high pace throughout the year.