2020 - Overall Economy
The U.S. economy maintained steady growth as 2020 began: initial estimates showed that real GDP grew by 2.3% in 2019, and a stellar labor market and steady consumer spending underpinned solid economic growth prospects. However, January also brought new global headwinds to the U.S. economy, including the global coronavirus outbreak.
As expected, the U.S. economy grew at a moderate pace in 2019, with final Q4 data showing a 2.1% annualized growth rate. As a result, the initial estimate for total 2019 real GDP growth is a healthy 2.3%. However, the composition of Q4 GDP growth was different from expectations, as outlined in the chart below:
- A temporary collapse in imports (-8.7% q/q, caused by drops in U.S. demand for imported consumer goods and automotive parts) was responsible for over 70% of the increase in real GDP
- Business investment was a much larger drag on growth than expected after a sharp drop in December capital goods orders
- Consumers spent less than expected in Q4. Consumer spending only contributed 1.2 percentage points to growth instead of the expected 1.6 percentage points
As Q1 2020 economic indicators began to be released, the economy remained strong and poised to absorb potential economic shocks, even from the ongoing coronavirus outbreak. The U.S. labor market was stellar in January, adding 225,000 jobs (9,000 of which were travel jobs) and keeping unemployment under 4%. More importantly, wage growth moved above the 3% mark, meaning that consumers were better prepared to meet an estimated 2.5% y/y increase in prices in January. In addition, the manufacturing sector escaped its slump by meeting new demand orders and consumer confidence remained high to start the year.