This article was published in the New Haven Register on May 26, 2019.
The nation’s economy continued to grow at a strong pace in the first quarter of 2019, following a positive performance in 2018. The global economy has begun a modest slowdown, however.
U.S. GDP expanded at a robust 3.2 percent annualized rate in the January-March period, an improvement over the 3 percent growth rate in 2018. The jobless rate fell to an historically low 3.6 percent in April, down from 3.7 percent in December.
These numbers easily surpassed economists’ expectations, marking a sharp upturn from the doom and gloom voiced toward the end of 2018. Economists were concerned after the Federal Reserve raised rates in December for the fourth time last year amid signs of a global economic slowdown. The Fed backed off, however, and has not raised rates so far in 2019.
In the U.S., the Leading Economic Index of The Conference Board increased 0.4 percent in March, following a 0.1 percent increase in February and no change in January. The index, a composite measure of various components of the economy, reached 111.9, with a baseline of 100 set in 2016. The board’s director of economic research cited positive trends in labor markets, consumer confidence and earnings.
In April, the Institute for Supply Management reported the 120th straight month of economic expansion amid increases in manufacturing sector activity. The rate of expansion in the first quarter, however, was slower than over the previous two years.
Stocks staged a dramatic comeback in the first quarter, with the Nasdaq soaring 16.5 percent, the S&P 500 jumping 13.1 percent and the Dow Jones Industrial Average rising 11.2 percent. The upward trend continued in April, with the Nasdaq up 2.6 percent, the S&P 500 up 3.9 percent and the Dow up 2.6 percent.
As of this writing, markets had entered a volatile stage as the U.S. and China traded retaliatory tariff hikes in a trade dispute that had investors worried about the potential economic consequences of a trade war. After China announced on May 13 it would impose tariffs on $60 billion of U.S. imports June 1 (after President Trump had raised tariffs on Chinese imports), Wall Street went into a free fall, with the Dow losing several hundred points that day alone.
Globally, the International Monetary Fund in April forecast growth in global economic activity at 3.3 percent in 2019, down from 3.6 percent in 2018. The IMF also forecast a return to a 3.6 percent growth rate in 2020.
The Conference Board in May said the world economy has entered a “modest slowdown.” The board revised its growth forecast for 2019 downward from 3.1 percent to 2.8 percent. In its report, the board said the slowdown “seems more driven by long-term factors such as stagnant labor supply and weak productivity growth rather than a large pullback in investment in anticipation of an imminent downturn.”
The World Bank in January projected global economic growth would soften from 3 percent in 2018 to 2.9 percent in 2019. The organization was expected to update its forecast in June. Stay tuned and be prepared as the summer months will likely bring volatility as current events with China, Iran, and Eurozone nations continue to unfold.
Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.