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Analysts at the Research Department at BBVA kept the full-year growth forecast at 2.2% for the US in 2019, followed by further deceleration to 1.5% in 2020, around the trend rate.

Key Quotes:  

“Global growth has slowed markedly this year but remains positive. We forecast 2019 growth at 3.1% followed by a slight improvement in 2020 to 3.2%.”

“Trade tensions have been weighing on capital spending, and sentiment remains depressed with forward-looking indicators pointing toward more slowdown to come. More worryingly, there are beginning to be signs that this is spilling over to the services sector.”

“Consumer fundamentals remain reasonably solid, apart from trade, but the labor market is softening. Payrolls growth, hours worked, and overtime hours all point to some deterioration.”

“Inflation is sticky below the Fed’s target, and expectations are down, including the Michigan expectations survey which is down to an all-time low.”

The principle risks to our view, on both the upside and downside, come from the trade war. A resolution could unlock new capital spending while further escalation could tip the economy into recession.”