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US GDP: Slow start expected in 2020 but growth should pick up afterwards – NFB

The US economy expanded by 2.3% during 2019. Krishen Rangasamy, analyst at the National Bank of Canada, explains growth was driven again by domestic demand. They continue to expect US real GDP growth of roughly 1.9% for 2020.

Key Quotes:

“On the surface, advance estimates by the Bureau of Economic Analysis of Q4 U.S. GDP growth look good. But digging deeper into the details, one finds things that are not as rosy as suggested by the headline growth of 2.1% annualized. Much of the boost to Q4 real GDP came courtesy of sinking imports, the latter collapsing almost 9% annualized, the worst since the 2009 recession.”

“The GDP deflator on a year-on-year basis was just 1.6% in Q4, the lowest in three years. Domestic demand managed to find support in Q4 from government spending, while consumption and residential investment also contributed (albeit to a lesser extent).”

“Looking at 2020 growth prospects, a slow start to the year is likely considering the continuation of manufacturing woes and possible disruption of economic activity brought by pandemic fears (e.g. travel and tourism). But GDP growth should pick up afterwards as related fears abate and production responds to underlying demand from consumers ─ which remain in good shape thanks to a healthy household balance sheet and a relatively high savings rate of 7.7% ─ and from stock rebuilding after the 2019Q4 inventory drawdown.”

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