US Economy 2018-2019: The Good, The Bad and the Ugly

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When reviewing America’s economic 2018 report, it is important to focus on the year in its entirety rather than look at what happened in the last month of the year. According to a recent interview held with NPR’s Scott Simon, it’s important to know this:

“The numbers for 2018 are good. The gross domestic product is growing. The U.S. economy is humming. But the numbers for December are bad. The Nasdaq, the Dow and the S&P all ended down yesterday.”

The US economy remains on its decade-long growth spurt.  It’s just that this month has seen some issues like: the partial government shutdown; continual drop in the stock market; increasing disarray in Trump’s administration; America’s trade war with China and more.  Oxford Economics Chief US Economist Gregory Daco however sees that the main attributes required for growth have not been impacted and thus we will continue to encounter expansion.  However, the stock market plunge could actually cause a domino effect with other issues.

So just because the economy took a bit of a nosedive in the third quarter should not put anyone into a panic. Growth remains on track to reach Trump’s 3 percent target for 2018 with a GDP increase at a 3.4% annualized rate (only a slight drop from the 3.5% October estimation). Still in the second quarter growth reached 4.2 percent.

Trump is blaming all of this on Jerome Powell and the hike in key short-term rate by the Federal Reserve tweeting that its officials “don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch — he can’t putt!”

US Trade Deficit: Impacts

The US has been a huge trade deficit for almost half a century.  Last year the figure was $552.3 billion and America’s deficit just with China amounted to $335.7 billion.  The question is, what impact does this have for America’s economy?  Experts have different ideas as to where this ultimately leads and what it means vis-à-vis its imports and exports.

For the most part, the commonly held view among economists is that such a trade deficit has little or no impact on unemployment figures or makes any dent on the economy in a negative day-to-day way.

Especially when looking at the money made from consumer imports like apparel, mobile technology, appliances etc.  Yet the question arises as to how it will impact the economy as travel and media are more utilized given that there was a $255.2billion surplus in that in 2017 as well.

Another argument could be made that America’s increasing trade deficit is actually more due to America fiscal policy and currency swings than trade policy.

According to Oxford Economics economists, there is little expectation that the trend will alter all that  much with the recent agreement between Xi Jinping’s recent agreement to increase its US export purchasing.  They pointed out:

“Although China has agreed to import more farm, energy and industrial goods, and restart importing soybeans ‘immediately,’ we look for export growth momentum to continue to wane,” they wrote, pointing partly to a slowing global economy.”

Plus the fact that it is getting even more expensive (increase from 64 percent of GDP in 2007 to 105.5 percent in 2018) to rescue America from its deficit.

So there is a long way to go until America is even on the road to recovery.  It seems that with its greatest deficit in a decade, the fact that oil exports are on the rise will do little to temper the  moods of the country’s economic advisers.