US: Still no recession, but slower growth in second half – Wells Fargo

Analyst at Wells Fargo maintaining a cautious forecast for the next few quarters regarding the US economic outlook. They see real GDP rising at a 1.2% annual rate during the fourth quarter. 

Key Quotes: 

“Fears about an imminent recession have faded considerably now that the Federal Reserve has cut the federal funds rate three times and the yield curve is once again upward sloping. The Fed has shown that it will do what it takes to offset the headwinds from slower global economic growth and continued uncertainty around U.S. trade policy. While data from the manufacturing sector remain weak, the overall macro data have continued to come in slightly better than expected, with job growth remaining strong and real GDP expanding at a 1.9% pace during the third quarter. Moreover, revisions to previously reported data have mostly been to the upside.”

“We still assume that the earlier announced 15% tariff on $156 billion of consumer goods will kick in on December 15. Though we acknowledge the possibility that the tariff hike might be delayed further or shelved altogether if a broader-than-expected “Phase I” deal is reached.”

“We are looking for exceptionally modest growth in Q4, with real GDP rising at just a 1.2% annual rate. Most of the weakness is due to declines in business investment but inventories are expected to decline further, slicing 0.6 percentage points off Q4 growth. On the bright side, homebuilding is gaining momentum and may produce some additional follow through into other areas of the economy. Even with the soft quarter, real GDP remains on track for a 2.3% calendar year gain.”