Economic Newsletter
April 9, 2019

By: Harris L. Kempner, Jr. President

We are even more certain that the U.S. economy will grow steadily throughout 2019 with no recession in sight. The Federal Reserve has now shifted its policy from threatened tightness to “patience.” This looser interest rate factor, coupled with the continuing strong U.S. consumer, will overcome mild weakness in U.S. manufacturing and make us feel secure in our forecast of 2.0%+ U.S. GDP growth during the rest of the year. No recessionary concerns, yet.

There are some concerns internationally, but they too seem to be gradually becoming less of a factor. China’s large stimulus efforts during the latter half of 2018 (more credit, lower rates) seem to be paying off now, as exemplified by March’s solid improvement in their PMI from near 50 to 52.

This improvement in the U.S. and China will aid Europe as well, particularly Germany, whose industrial production and retail sales have recently shown increases for the first time in months.
Still hanging over all of this are the unresolved trade disputes between the U.S. and China, Mexico, Canada, and all of Europe. The uncertain cost by these factors will keep growth at a lower level than would be possible otherwise and if some of these discussions founder and lead to continuations of tariff regimes, our estimates of the U.S. and world economy will turn out to be too optimistic. We’ll just have to wait and see.