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United States (US) Economic Forecasts

US economic growth is slowing to trend, roughly 2% (fourth quarter over fourth quarter). As underlying demand growth ebbs, lower rates are needed to support even this pace. The Federal Reserve’s signaling of a pause helped the recovery in equities and lowered term yields.

Investor concerns over rising risks of a downturn after 2019, stoked by developments abroad, resulted in sharply worsening financial conditions in late 2018, despite prospects for solid trend-like US growth in 2019. Helped by a more dovish-sounding Fed, a recovery in financial conditions is now supporting GDP growth near trend.

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Medium- and Long-term Forecast

  • IHS Markit forecasts 2.0% GDP growth in 2019, followed by 2.1% growth in 2020 (fourth quarter over fourth quarter). Thereafter, a period of below-trend growth is assumed, balancing the risks between continued trend-like growth and a recession.
  • The Fed is now expected to implement one more federal funds rate hike and wind down its balance-sheet run-off, bringing the top of the funds range to 2.75%, near the longer-run nominal neutral rate.
  • The unemployment rate is forecast to decline to 3.5% by the second half of 2019 and core personal consumption expenditure inflation to rise to 2.2% by fourth quarter 2019.
  • We view the recent drop in broad equity markets as only partly related to fundamentals and look for an 18.5% gain in the S&P 500 this year (end-2019 over end-2018).
 
 
 

Country Risk Rating for the United States

  • In mid-term elections held in November 2018, Democrats took a majority in the House of Representatives, while Republicans extended their majority in the Senate. Given the congressional composition, the likelihood of policy gridlock will almost certainly increase. 
  • Although organized attack risks remain, radicalized Islamist and domestic groups and individuals pose a more imminent threat. Issue-driven protests, including around immigration, gun control, or reproductive rights, are common, with an increasing likelihood of demonstrations by individuals associated with right-wing extremist organizations.
  • We forecast 2.0% GDP growth (fourth quarter over fourth quarter) followed by 2.1% growth next year. After 2020, we assume a period of below-trend growth, balancing the risks between continued trend-like growth and a recession.
  • Long-term interest rates are 10 to 20 basis points lower, reflecting a recent update to our “Fed call”, with just one more rate hike penciled in for December.



A note on our risk ratings: IHS Markit derives country risk ratings for 206 countries, based on six separate ratings in each country: Political, economic, legal, tax, operational and security with 22 detailed sub-aggregate risks. These ratings allow you to quantify risk with greater specificity with a scoring system based on a 0.1-10 logarithmic scale. Seven risk bands, from low to extreme, allow you to compare and contrast risk between countries and regions.

Experts

Ben Herzon, Ph.D.

Known as the current-quarter Guru of IHS Markit, Dr. Herzon focuses on translating recent trends in high-frequency data into a near-term forecast of GDP growth with high statistical precision. That includes directing the analysis of the data, authoring data commentaries, running the current-quarter tracking system, designing and maintaining a population-weighted snowfall database and conducting other research that requires a heavy dose of statistical horsepower. In addition, he writes portions of the forecast reports and conducts and reports research on a variety of macro topics. He joined Macroeconomic Advisers (later acquired by IHS Markit) a year prior to receiving his Ph.D. in economics from Washington University in April 1998. His research there focused tracing the effects of monetary policy shocks through various industrial sectors, employing BEA's input-output accounts and time-series econometric techniques. He is a member and previously served as president of the St. Louis Gateway Chapter of NABE.

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Ken Matheny, Ph.D.

Mr. Matheny has more than two decades of experience as a professional economist and macroeconomic forecaster, including economic analysis, econometrics, and financial modeling. He is an expert on Federal Reserve policies, macroeconomic impacts, and interactions with the banking and financial sectors. He writes frequently on macroeconomics, financial markets, and the Federal Reserve. He maintains regular contact with clients and is available for media engagements. He has appeared in The Wall Street Journal, New York Times, Bloomberg, Yahoo Finance, Marketplace, and other US and foreign media outlets. Prior to joining IHS Markit, he was a Senior Economist at Macroeconomic Advisers. He was an assistant professor at Purdue University and worked in the banking industry. He holds a Ph.D. from UCLA and a Bachelor of Arts degree from Washington University in St. Louis (Economics and German), magna cum laude.

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Joel Prakken, Ph.D.

A thought-leader on US economic outlook, monetary policy forecasts and fixed income markets with over 30 years of experience and expertise as a macroeconomic modeler, Dr. Prakken has developed an unmatched structural-econometric model of the US economy. He co-founded Macroeconomic Advisers which was acquired by IHS Markit in 2017. Prior to founding Macroeconomic Advisers, Dr. Prakken held the position of senior economist at the World Headquarters of the IBM Corporation and before that he served with the Federal Reserve Bank of New York, US. He also has held positions on the faculties of New York University's Graduate School of Business, the Economics Department of Washington University, and the Olin School of Business at Washington University. He is the past president and a fellow of the National Association for Business Economics (NABE). He is also past president of the Gateway Association of Business Economists in Saint Louis. Dr. Prakken has many publications to his credit, including papers written for the Council of Economic Advisers, the American Council for Capital Formation, and the Center for the American Study of Business on topics ranging from tax reform to budget policy to monetary policy to the impact of technology on productivity. He has testified on these topics before committees in both the US House of Representatives and the Senate. Dr. Prakken has participated in meetings of the Outside Consultants to Board of Governors of the Federal Reserve System, is a past member of the Panel of Economic Consultants to the Congressional Budget Office and is a current member of the advisory committee of the Bureau of Economic Analysis. Dr. Prakken completed his undergraduate degree in economics at Princeton University, and holds an MA and Ph.D. in economics from Washington University in Saint Louis, United States.

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Nariman Behravesh, Ph.D.

Dr. Behravesh works closely with the company's chief economists on the forecasting process at IHS Markit. Dr. Behravesh and his team have received numerous awards, among them the 2017 Lawrence R. Klein Blue Chip Forecast Accuracy Award and top forecasters by Consensus Economics in 2013. Attaining consistently high annual ranking among US forecasters from The Wall Street Journal, Dr. Behravesh was ranked #3 (out of 56) for 2006, and was the only forecaster to place in the top six for 2003, 2004 and 2006. He frequently is cited by leading business publications, including The Wall Street Journal, The New York Times, The Financial Times, Forbes and US News & World Report. He appears regularly on national radio and television programs, including BBC World Business Report, NBC Nightly News, CNN Headline News, The News Hour with Jim Lehrer (PBS), Fox News, CNBC, Bloomberg TV and Radio, All Things Considered and Marketplace on National Public Radio. He is a featured speaker at many of the top global conferences each year, including IHS Markit CERAWeek and the World Economic Forum in Davos, Switzerland.Dr. Behravesh holds Ph.D. and M.A. degrees in economics from the University of Pennsylvania, where Nobel Laureate Lawrence R. Klein was his dissertation advisor, and a Bachelor of Science from the Massachusetts Institute of Technology, US.

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Sara Johnson

In this role, she helps clients assess worldwide business and financial opportunities and risks. Ms. Johnson co-authors the Global Executive Summary, manages the Executive Strategy Council, and presents the economic outlook to international conferences. She previously served as North American research director and chief regional economist with Standard & Poor's DRI, and managing director of global macroeconomics with Global Insight, predecessors of IHS Markit Economics & Country Risk that is now part of IHS Markit. Ms. Johnson is a former director of the National Association for Business Economics and the NABE Foundation and was named an NABE Fellow in 2014. She is past president of The Boston Economic Club and a member of the American Economic Association. Ms. Johnson holds a Bachelor of Arts in Economics and Mathematics from Wellesley College, US, and earned her Master of Arts in Economics from Harvard University, US, with concentrations in Finance and Macroeconomic Theory.

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Chris Varvares

Mr. Varvares has nearly 40 years of experience in macroeconomic modeling, forecasting and policy analysis, as co-head of US Economics at IHS Markit, in his previous role as a principal of Macroeconomic Advisers and as a member of the staff of the President's Council of Economic Advisers (1981-1982); he served as a member of the US delegation to the OECD in April 1982. Macroeconomic Advisers was acquired by IHS Markit in 2017. He and the IHS Markit US economic principals serve as consultants to key agencies of the US and foreign governments, major trade associations, and private corporations, and are widely quoted in the business and financial media. IHS Markit is widely recognized as among the most accurate forecasters of the US economy. Mr. Varvares is a recent past president and a former director of the National Association for Business Economics (NABE). He served as president of the NABE Gateway chapter in St.Louis and is a member of the American Economic Association. He serves as a member of the New York State Economic and Revenue Advisory Board and has participated in the meetings of the Outside Consultants to the CBO, has been a panelist for the World Economic Forum, and he sits on advisory boards for the Olin Business School at Washington University and the Walker School of Business and Technology at Webster University. Mr. Varvares holds a Bachelor of Arts in Economics from The George Washington University and received his graduate training (ABD) in Economics from Washington University in St. Louis, where he was also a member of the adjunct faculty in both the economics department and the Olin School of Business.

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Patrick Newport, Ph.D.

Dr. Newport tracks the investment and construction sectors for the Global Insights Macroeconomic Service and serves on client consulting projects. He manages long-term forecasts for Global Insights and co-manages the macroeconomic model. He joined the company in 1998. Previously, he worked as a research economist for the Washington State Department of Revenue, where he later served as a senior economist for the Office of the Forecast Council of Washington State. He holds a Bachelor of Arts in Business Administration and a Master of Arts in Economics from Louisiana State University, US. Dr. Newport attained his doctorate in Philosophy from Harvard University, US. He speaks English and Spanish.

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Kathleen Navin, CBE

She joined IHS Markit through the 2017 acquisition of Macroeconomic Advisers, where she joined June 2010. Her primary responsibilities pertain to the US Macro Insights (USMI) service and to special reports and projects that utilize the proprietary macroeconomic model, MA/US. Ms. Navin is the technical lead on the Macroprudential Scenarios Service, coordinating and contributing to the development of scenarios and supporting products. In 2015, she became a member of the National Association of Business Economics' inaugural class of Certified Business Economists. She was a research associate at the Federal Reserve Bank of Kansas City in the division of Macroeconomics and Monetary Policy. Ms. Navin graduated with a Bachelor of Science degree in Economics in 2007 from the University of Missouri, where she went on to earn a Master of Arts degree in Economics in 2008.

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