Tuesday, January 21, 2020

Everyone can see growth slowing in 2020. But by how much?

While people are (understandably) watching the trial in DC today, this seems to be an interesting note from across the water.

Not recession, but basically the same as the last 3 quarters of 2019, which will end up around 2% after 2.5% growth in 2018. And it's a slight downtick from what the Congressional Budget Office projected for GDP growth in August (2.1% in 2020, 1.8% in 2021).

UW's Menzie Chinn also took a step back and looked at where the economy stands today. And Chinn adjusted the job growth to the lower levels signaled by the "gold standard" Quarterly Census of Employment and Wages, which will likely result in a sizable downward revision to job growth in a couple of weeks.

And while the decline in December Industrial Production was largely due to the record warmth around Christmas (which lowered the amount of heat required to be produced), it's still been relatively flat for more than a year. We'll see if it turns around with a colder January, but you're already seeing hints that whatever we signed with China isn't going to make any notable difference for trade...or worse.
[Chad] Bown, who served as a senior economist for international trade in the White House, under Obama’s leadership, said he is “very worried” about what’s in the agreement.

China agreed to buy an additional $200 billion in U.S. goods over the next two years, as part of the deal. President Donald Trump, who addressed the Davos forum earlier on Tuesday, said the number of purchases could end up closer to $300 billion.

“These are unrealistic numbers, which puts the whole viability of the deal into question,” Bown said, adding that the only way to reach these figures is by diverting trade away from other countries, such as soy beans away from Brazil and fish away from Canada.

Among the additional purchases of U.S. goods, China has committed to buy at least $40 billion worth of American farming products. However, a leading commodities expert at Goldman Sachs casted doubts over whether China will manage to do that. Speaking to CNBC earlier this month Jeff Currie said “there is still a lot of uncertainty about how you would achieve $40 (billion) or potentially even $50 billion of agricultural purchases.”
Yeah, it's going to take something else for the US economy to not slow down further in 2020. Maybe the Bubbles in the stock market and the home market somehow pull demand ahead to have things keep growing. But what happens if those Bubbles burst, or even have a normal 10% correction in the coming months? 2.0% might be a generous estimate if that occurs.

EDIT- Here's Prof Chinn with another sign that things aren't so swell in the transport sector.


  1. How do they determine disposable income?

    1. Generally it's disposable income MINUS taxes paid. It doesn't look into who's getting the income and who's paying the taxes.