Growth And Predictions For The US Economy In The Third Quarter

Tweed-Economics-US-Economy (1)
Tweed-Economics-US-Economy (1)

Overview of the US economy

The United States of America runs a multi-faceted, free market economy. With a GDP of $21 trillion, the US has the largest national economy in the world. The largest component of the US GDP comes from consumer spending, government expenditure, investments and net exports. According to an article published on the Balance (1), consumer spending accounts for close to 70% of the GDP, while government spending contributes about 17% of the total. Business investment is an important promoter of the GDP since it covers key drivers of the economy, such as intellectual property, manufacturing and real estate construction. The US budget is largely funded by income taxes obtained from tax payers.

What are the economic growth projections for 2019?

The US economy has been on a steady recovery following the devastating effects of the 2008 financial crisis. The renewed hope is evident in the strong unemployment numbers, durable goods orders and stable GDP growth. The economy is also showing a lot of resilience when you look at the inflation and deflation statistics. However, the rate of economic growth is expected to slow down from 2019, albeit gradually.

Most economists expect this trend to prevail in the foreseeable future owing the existing economic climate. According to Balance (2), the GDP growth rate for 2019 is projected to grow at between 2% to 3%. In the next two years, the US economy is expected to grow at 2% in 2020 and 1.8% in 2021. Economists expect the unemployment rate to remain stable since the market isn’t moving towards inflation or deflation. The number is likely to rise slightly in the coming years to stand at 3.7% in 2020 and 3.8% a year after.

In spite of the impressive figures, there is concern that a significant number of workers are only engaged on a part-time basis and most would desire high-paying, permanent placements. The report shows the inflation rate will remain low in 2019 to stand at 1.5% and rise steadily thereafter to 2% in 2021. The Fed may also lower the interest rate on the back of stable, core inflation rate, whose index doesn’t feature the highly volatile gas and food prices. Lastly, the manufacturing sector is expected to grow faster than the overall economy.

Growth and economic policy predictions: An expert view

A lot of the things expected to shape the economy from Q2 all through to Q4 and beyond will hinge on policy implementation and positive sentiments from leaders. A Washington Post report by a former Chief Economist, Jared Bernstein sees the federal deficit rising and the economic growth slowing in 2019. The likelihood of Federal deficit rising is as a result of President Trump’s tax cut and the consistently rising government spending.

According to the author, the economic growth will be weighed down by the fading stimulus package. It important to note that the deficit-funded tax cuts and spending contributed a whole percentage point to GDP growth in 2018. The economist also predicts zero increase in the interest rate; rise in wages and inflation and escalation of the trade war. Fears about China’s slowing economy and a simmering trade war with the US remain a big concern to the economy.

The politics of the economy

America has been at loggerheads with China and other trading partners. The trade war could escalate since it is part of Trump’s campaign pledge and bedrock of his “America First” economic policy. When he assumed office in 2017, President Donald Trump promised to grow the economy by a staggering 4%. If these growths were to be realized, economists fear this would fuel “overconfidence irrational exuberance”, which could be detrimental to the economy.

The growth could seriously interfere with the fundamentals of the business cycle, such as capital availability, supply, market perception and demand. However, the President’s policy statements are not expected to hugely impact the unemployment numbers, which is expected to stand at 3.6% in 2019. Looking at the overall performance of the economy, a deduction can be made that changes are less stark compared to the day to day intricacies of the stock market.

In his assessment of the economy, Alenjandro Chafuen, a policy contributor at Forbes magazine also sees a slowing economy; one that will eke 2% growth in 2019. The forecast stems from the current push for lower taxes and stricter regulations from the new, Democrat dominated Congress. The push is expected to face headwinds from the Republican led Senate and the government bureaucracy. More internal pressure will come from increased protectionist policies and rising government deficit.

Will The G20 Summit Help The Global Economy? Facts You Need To Know

Tweed-Economics-Global-Economy
Tweed-Economics-Global-Economy

All eyes were on the G20 Summit in Osaka, Japan in June as the world held its collective breath about the trade war between China and the United States.

Some of the most important talks that were the focus of the 2019 G20 were actually conducted before the G20 began. Other important discussions and agreements did not get fully aired in the mainstream media. This article will examine the important business of the G20 that will actually have an impact upon the lives of many around the world.

What is the G20?

According to the BBC, the G20 economic summit is a meeting with leaders from the 20 largest economies in the world. These countries make up 86 percent of the global gross domestic product (GDP) and contain two-thirds of the world’s population. Notable countries that are a part of the G20 include the United States, Russia, China, India, the United Kingdom, Germany, France, Japan, South Korea, Brazil, Australia, Canada and Mexico. The idea for the meetings began in 1999 when there was an economic crisis in East Asia that was threatening to expand to other areas of the world.

What Were the Important Issues Discussed This Year?

Discussions included trade discussions and the Iran Crisis, this is what happened:

The U.S./China Trade War

According to The Guardian newspaper, both the U.S. and China have been engaged in an escalating war of trade tariffs imposed upon the other country. The Guardian stated that Japanese Prime Minister Shinzo Abe, E.U. President Jean-Claude Juncker and Russian President Vladimir Putin were among others that are urging the U.S. and China to find commonalities and reach agreements because their trade war is endangering the world economy.

According to CNBC, U.S. President Donald Trump and Chinese President Xi Jinping put their teams of advisors to work before the G20 and began to come up with a bit of a compromise. At the G20, both leaders announced they would forego further tariffs.

Also, Trump announced that he would allow Huawei, the Chinese telecommunications giant, to buy products from U.S. firms. Trump also stated, though, that the issue of American firms selling products to Huawei is not totally closed. According the CNBC, the International Monetary Fund has calculated that the proposed tariffs between the two countries and those already being implemented will cause a half of a percent decline in growth in the world economy.

Macron Makes a Line in the Sand on Paris Accords

According to the New York Times, French President President Emmanuel Macron issued what amounted to an ultimatum to 19 of the 20 countries that comprise the G20. He stated that France will not be a part of any agreements brokered at the G20 that do not honor the Paris Climate Treaty. Macron has given up hope of convincing the lone hold-out of the G20 on the Paris climate accords, the United States, to sign on.

The French government is also angry at the U.S. for leaving the JCPOA anti-nuclear pact with Iran and also angry at the U.S. government’s belligerent stance towards Iran. Macron is very displeased that the U.S. stance towards Iran could lead to war.

Politico reported that Trump lobbied the Saudi Arabian, Australian, Turkish, and Brazilian leaders to oppose or weaken the climate agreement language from the previous G20 summits.

Meanwhile, Reuters reported that Macron also placed some direct pressure on Brazilian President Jair Bolsonaro, stating the French would not sign onto an upcoming trade deal between the E.U. and the Mercosur group that consists of the countries of Argentina, Brazil, Paraguay and Uruguay if Brazil did not honor the Paris climate accord. France is concerned about competitiveness between the farmers in France and those in the South American countries. French farmers are prohibited from using pesticides and must reduce their carbon footprint. Macron is demanding that the Mercosur countries follow strict E.U. environmental guidelines. Macron is also concerned about the expansion of the devastation of the Amazon rain forest.

This development continues to illustrate that multi-country alliances and trade deals can spill beyond the borders of one country to others. In this case, the South American countries will be required to follow E.U. guidelines for the farming industry if they hope to trade with the E.U.

Russia, China and India Agree on Trade

The National reported that Russian President Vladimir Putin, Chinese President Xi Jinping and Indian Prime Minister Narendra Modi made a strong statement at the G20 that they oppose countries engaging in unilateral actions, protectionism instead of fair trade and unlawful sanctions against other countries. The three countries urged all G20 members to respect the sovereignty of other countries and the rule of law.

No Real Progress on Iran Crisis

Although German Prime Minister Angela Merkel and Russian President Vladimir Putin urged the United States to step back from threats of war with Iran, little progress appeared to be made in this urgent matter.

Overall, an easing of the U.S./China trade war, an effort to bolster the Paris climate accords and a strong statement from three of the BRICS member nations on free trade and sovereignty issues highlighted the 2019 G20.