US economy headed for another solid gain - RBC

According to analysts at Royal Bank of Canada, the US economy is forecasted to continue to expand at an above potential pace in 2019 although tighter financial conditions will likely cool consumer spending and business investment somewhat and government spending support will dissipate over the course of the year.

Key Quotes

“We expect growth of both exports and imports to slow in 2019 with the strong US dollar also weighing on demand for US exports. At the same time, the strong currency will partially offset the tariff -driven rise in the cost of imported goods. While costs associated with the tariffs may initially be absorbed by businesses, they will likely filter into consumer prices the longer they remain in place.”

“The late-cycle surge in growth fueled strong hiring activity, with the US unemployment rate falling close to a 50-year low of 3.7%. Hiring accelerated in 2018 and businesses reported that workers were becoming harder to find. As a result, wage growth, which had been lackluster, picked up pace. With the economy projected to grow at an abovetrend rate again in 2019, we expect these labour shortages to persist, creating greater competition for workers and further upward pressure on wages.”

“Faster wage growth, lower taxes and solid balance sheets will support another healthy year for consumer spending.”