First quarter GDP is projected to be around 2%, versus an average over 3% for the last three quarters. This is not quite unexpected news, as US GDP 1st quarter numbers have been averaging lower than the rest of the year for the past 15 years. Consumers seem to have a debt hangover from the holiday season, and focus on paying those bills, before taking on more debt. That makes logical sense and is personally relevant to me.
The real question is, what will the rest of the year hold? Will it be another 2017, with GDP averaging over 3% the rest of the year? Or are there other challenges providing headwinds for the US economy?
One challenge could be Oil prices. Crude oil recently hit $70 per barrel, the highest level in four years. As much as that could aid a recovery in the oil & gas industry, it also could provide a challenge to the overall economy – especially considering the timing of these increases are just prior to the summer vacation travel period.
Another challenge could be the Trump tariffs. Many economists (including those at the Fed) and international economic organizations (including the IMF and WTO) believe that the administration’s policies would not only be bad for the US economy but could negatively impact the worldwide economy.
However, the news is not all bad. Consumer confidence is still near the February, 2018 17-year high of 130.0 (March was 128.7). Unemployment numbers are still hovering at or near historic lows (around 4%). Wages have been increasing, as predicted by the Federal Reserve. And housing, in general, has been one of the main strengths of the economy.
What could go wrong? What indicators should we track to tell whether the economy is OK or headed toward a recession? My answer is look to the stock market. It is said that stock market downturns usually precede a recession by about six months. So, if the stock market tanks, rest assured the economy will soon follow.