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Despite volatility, NAFCU economist expects steady GDP growth in 2020
The Commerce Department released its revised estimate for third quarter economic growth, which it bumped from its initial estimate of 1.9 percent to 2.1 percent. NAFCU Chief Economist and Vice President of Research Curt Long attributed the upward revision to "consumer spending, which exceeded expectations."
"The biggest downside risks remain the trade ware and slowing global growth," Long added in a NAFCU Macro Data Flash report. "Industrial activity in Q4 remains slow and is mostly responsible for the early estimates for growth in the current quarter. The rest of the economy looks solid, though."
Long provided additional insights to the labor and housing markets, which are currently performing well. Looking ahead, he predicted that "monetary policy should remain accommodative."
"The road ahead will continue to be volatile, and the next downturn may only be a headline way, but for now the economic picture has cleared up since the anxiety-filled summer months. Real GDP growth has been close to 2 percent for nearly the entire duration of the recovery, and NAFCU expects something similar in 2020," Long concluded.
According to the Commerce Department's updated estimate, contributions to growth of real GDP came from gains in consumption spending (+2 percent), government spending (+0.3), residential investment (+0.2 percent), and inventories (+0.2 percent). Growth was reduced by net exports (-0.1 percent) and nonresidential investment (-0.4 percent).
PCE inflation, the Fed's preferred inflation metric, decreased from 2.4 percent in the second quarter to 1.5 percent in the third quarter. Core PCE inflation (excluding food and energy) increased from 1.9 percent to 2.1 percent – reduced slightly from the initial third quarter estimate – over that time.