MNI DATA PREVIEW: US 4Q GDP Seen +2.1%, May Run Through 2020

By Ryan Hauser

     WASHINGTON (MNI) - U.S. gross domestic product is expected to show a first

estimate of 2.1% growth in the fourth quarter, a pace that may continue through

2020 as diminished risks from trade are countered by fading fiscal stimulus and

Boeing production delays. 

     The gain seen in the Bloomberg consensus would be in line with the previous

two quarters, in data due for release Thursday by the Bureau of Economic

Analysis. The preliminary fourth-quarter GDP price index is also expected to

remain at 1.8%. Some economists on Wednesday warned GDP could fall below

expectations after a report showed a bigger-than-expected drop in the trade

deficit.

     Stable growth prospects come as Federal Reserve officials on Wednesday kept

the federal funds rate unchanged following three rate cuts last year. The Fed

highlighted a strong labor market and "moderate" consumer spending while exports

and business fixed investment remain weak. Comments from last month's FOMC

meeting also showed the Fed saw a decreased chance of recession.

     The economy should get some momentum this year after growth took a hit from

companies that made a sharp slowdown in inventory accumulation according to

Capital Economics. Moreover, the economy continues to see unemployment around

the lowest in half a century at 3.5%, a boost to consumer demand. 

     Consumer spending, which can account for up to 70% of U.S. economic

activity, may be partly responsible for the flat growth in GDP. Core PCE growth

has remained at 0.1% since August 2019 and is expected to hold at that level for

December. 

     The Conference Board said its leading indicators suggest 2.1% growth for

2020 GDP and the IMF sees it at 2%. Both agencies say growth will slow a little

from last year, with the IMF pegging it to a smaller boost from fiscal stimulus

and looser financial conditions. 

     One sore spot in the forecast is Boeing, which said in December it would

temporarily halt production of the 737 Max airliner. Boeing's orders plunged to

3 in December from 63 in November. Treasury Secretary Steve Mnuchin said he

expected Boeing's cuts to lower 2020 first-quarter GDP by as much as 0.5%.

--MNI Washington Bureau; +86 (10) 8532-5998; email: ryan.hauser@marketnews.com

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