The US Economy Expected To Slow Down To 2.5 Percent in 2019

The US economy is expected to slow down to 2.5 percent in 2019 from 2.9 percent recorded in 2018.

According to the World Bank, the slower growth in the economy of the United States is due to the removal of one-off tax benefits enjoyed in 2018.

The economy is also set to be affected by the fiscal stimulus injected by the government of President Donald Trump as a result of increased spending in 2018.

In the first quarter of this year, the US economy grew at a rate of 3.1 percent y/y, supported by increased local government spending, higher exports and business inventories.

The slower pace of growth for the rest of the year is expected to be weighed down by reduced exports to major traditional partners such as China and the Eurozone, owing to uncertainty regarding trade between the US, China and the Eurozone.

The Federal Open Monetary Committee (FOMC) held 4 meetings during H1’2019, and maintained the Federal Funds Rate at the range of 2.25 – 2.50 percent.

The stock market in the United States had been on an upward trend, with the S&P 500 gaining by 17.1 percent during the first half of 2019.

The gain was largely supported by improved corporate earnings performance by a majority of counters in financial services, oil and gas, consumer goods and technology.

The current US administration has been for the tax reforms, as the corporate tax rate was reduced to a uniform rate of 21.0 percent from the previous revenue-based tiered system that had the lowest tax rate for corporations at 25.0 percent.

US valuations are still higher than their long-term historical average with the Shiller Cyclically Adjusted P/E (CAPE) multiple currently at 30.2x, which is 78.7 percent above the historical average of 16.9x.

There is tension between the United States and Iran. Investors are worried that the US might go to war with Iran, a move that is likely to disrupt investments around the world.