- The U.S. economy continues to fire on most cylinders, though trade and the faltering housing market are holding back growth and headwinds are picking up.
- Economic growth for the year will be the strongest in years, although the recent pace will not be sustained much longer.
- Job growth remains robust but continues to moderate as we near full employment.
- Inflation and wage growth are now at, or above, Fed targets. The Fed will continue its pace of incremental hikes through next year, in its quest for a soft landing in 2020 or 2021.
- Despite the apparently successful renegotiation of NAFTA, trade tensions remain the greatest near-term risk, but the rising dollar and interest rates and slowing global growth also threaten U.S. trade and business investment.
- Property market fundamentals continue to improve, along with faster economic growth, but further gains will continue to soften in most sectors.
Second quarter GDP growth roared in at 4.2%, its fastest rate since late 2014, so it was almost inevitable that the pace would slow from there. But economic conditions are still quite robust, with third-quarter GDP registering a still-solid 3.5% according to the initial government estimate. That’s on par with its long-term average (black dashed line in the chart at right) and well ahead of its 2.2% pace during this cycle (red dashed line).
Almost everything seems to be going right now: households are consuming, businesses are investing, manufacturers are producing and the government is spending. As we reported in our last economic outlook, surveys of both consumers and business leaders remain near 20-year highs, which translates into stronger consumer spending and business investment. A pickup in government spending is also helping, fueled by the Bipartisan Budget Act enacted in January; government contributions to GDP growth this quarter were the strongest since early 2016.
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Andrew J. Nelson is Chief Economist for Colliers International in the United States. Based in San Francisco, he covers a mix of general economic topics as well as related issues that bear on the performance of property markets.