DB: Tweaking an extraordinary US outlook: A look at 2019 and beyond
Fall Fed Chair Powell observed that the performance of the US economy "is testament to the fact that we
remain in extraordinary times." We agree. With our 2018 outlook holding up remarkably well over the past
year, we take a look towards 2019 and beyond. Risks to this "extraordinary" outlook remain, but we now
find ourselves expecting the current expansion, which is set to become the longest on record next year,
to continue for several years to come. These tweaks come at a time when the consensus and market pricing
are moving in the opposite direction, with growing expectations of a 2020 recession.
growth forecast has edged lower by a tenth, mostly due to the front-loading of tighter financial
conditions and some slowing in global growth momentum. The most meaningful revision to our outlook comes
in 2020, however, where we have lifted our forecast by half a percent to 1.8%, due to a gentler Fed
hiking cycle in 2019 and a more supportive fiscal impulse. Our first look at 2021 sees growth slowing
further to 1.6%.
Perhaps the most extraordinary feature of this expansion is continued
impressive labor market performance coupled with modest inflation pressures. We expect the former to
continue in 2019, with the 3.4% unemployment rate set to tie the lowest level since 1953. Wage pressures
should continue to firm, reducing concerns about a wage puzzle. But as growth slips below potential
beyond, the unemployment rate should drift higher, reaching 3.8% in 2020 and 4.3% in 2021.
Core inflation is still expected to rise above the Fed's target next year, though the magnitude of this
overshoot is more modest. Recent softer inflation data, the lagged effects of dollar strength, and some
downside risk from a weaker profile for health care inflation should help to offset some of the tailwind
from a tight labor market. Core PCE inflation is now expected to rise to 2.2% in 2019 and 2020, and
moderate slightly in 2021.
With the labor market beyond full employment and inflation slightly
above the Fed's target, we still expect the Fed to move to a restrictive stance in 2019, but the path to
that point has changed. We now anticipate three rate hikes in 2019, with the Fed taking a break, or
pause, from their gradual quarterly pace of tightening most likely in Q3. That should be followed by one
last rate increase in 2020, leaving our terminal rate for this cycle unchanged at 3.4%. Balance sheet
unwind, which has been on autopilot to this point, could reach its endpoint in late-2019.
Alle Rechte vorbehalten. Nutzung ausschließlich für den privaten Eigenbedarf.
Eine Weiterverwendung und Reproduktion über den persönlichen Gebrauch hinaus ist nicht gestattet.
Kursdaten: Powered by Interactive Data Managed Solutions (IDMS). IDMS und die Datenlieferanten übernehmen keine Gewähr für die Richtigkeit, Vollständigkeit und Aktualität der Inhalte des Informationssystems. Die Kursdaten werden je nach Vereinbarung mit den Börsen/Handelsplätzen in Realtime, 15 Min. verzögert oder End-of-Day dargestellt. Weitere Hinweise entnehmen Sie bitte unseren AGB (§4 Abs.7).