The American economy has sustained a steady pace of growth as 2019 draws to a close, driven by healthy consumer spending and a strong job market.
While fears about an imminent recession have diminished, the economy still shows signs of slowing down. The U.S. economic recovery has hit a lot of challenges over the past few months with declining business investment and shrinking manufacturing sector. Amid a synchronized global slowdown, it faces a thorny path ahead.
In the third quarter, U.S. economic growth rose at an annual rate of 2.1 percent, up slightly from 2 percent in the second quarter, which represents a sharp deceleration from 3.1 percent in the first quarter, according to U.S. statistics.
Dropping GDP Figures
In a recent survey conducted by the National Association for Business Economics (NABE), the U.S. gross domestic product would be declining from 2.8 percent in 2018 to 2.4 percent before year-end.
Following the latest policy meeting, Federal Reserve Chairman Jerome Powell described the mixed economic scenario as: "High household and consumer spending driven by a stable job market, rising incomes, and strong consumer confidence."
Business investment and exports, on the other hand, remain weak, and production output has declined over the past year, Powell pointed out.
The unemployment rate, which has stayed below 4 percent since the start of the year, fell slightly in November to 3.5 percent, again reaching the lowest in almost five decades. Between September to November, job gains totaled 205,000.
Despite robust consumer spending and a strong labor market, business investment has plummeted for two consecutive quarters, down 2 percent in the second quarter and 2.4 percent in the following quarter, serving as a drag on the overall economy of the country.
Narrowing Economic Activity
Moreover, the Institute for Supply Management has reported a contracting economic activity in the manufacturing sector for a fourth consecutive month in November. In September, the Purchasing Managers Index reported 48 percent, the lowest in the last 10 years.
Together with many analysts, the central bank chairman has repeatedly cited trade disputes as one of the factors that weighed heavily on the country's economy.
Noting that the economy has faced some "significant challenges" as a result of slower global growth and trade uncertainty over the past year, Powell said the Federal Reserve has revised their monetary policy stance to "cushion" the economy from these developments and "provide some protection against associated risks."
According to Powell, such policy changes put the country's current target range of federal funds at 1.4 percent to 1.8 percent.
