April 1, 2019 — Q4 2018 Growth Revised Down; Q1 2019 Under Pressure

APRIL 1, 2019 – Q4 2018 GROWTH REVISED DOWN; Q1 2019 UNDER PRESSURE

Final GDP numbers for the last quarter of 2018 were revised lower last week by 0.4 percent to 2.2 percent. The result was sizable enough to pull 2018 annual growth lower by 0.1 percent to 3.0 percent.  As the first quarter of this year has been slowing down, the revised numbers have set up the expectation for weaker growth once the March numbers are finalized.

Bloomberg believes the slowdown is temporary and growth will rebound later this year as economic fundamentals are sound. The shock to consumer spending in the first quarter is not expected to continue as personal income growth will rise as wage pressures pickup. Labor inflation is running at a fast pace which will push consumer spending, the main driver of economic growth.  Bloomberg is expecting GDP growth to reach a reasonably healthy 2.4 percent in 2019 as unemployment continues to fall and inflation ticks up. 

The Fed says it sees one additional rate hike over the three-year forecast horizon, while Bloomberg thinks one hike in 2019 and one in 2020 are more likely based on expectations of slightly higher inflation.

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