JP Morgan Economists Lower Q2 2019 GDP Estimate to 1% Growth

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JP Morgan Economists Lower Q2 2019 GDP Estimate to 1% Growth

The last time the Bureau of Economic Analysis announced the United States’ quarterly gross domestic product growth, analysts were surprised to learn actual growth was 3.2% — far higher than the 2.5% rate that many expected. However economists at JP Morgan aren’t expecting a repeat performance for Q2. In fact they’re slashing their estimates by more than half.

As CNBC reports, JP Morgan economists had previously stated they were expecting 2.25% GDP growth for the second quarter of the year. Now they’ve updated that estimate, anticipating a growth rate of just 1%. Explaining their rationale for the outlook, they wrote, “The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. Coming on the heels of last week’s crummy April retail sales report, it suggests second quarter activity growth is sharply downshifting from the first quarter pace.”

Naturally one of the biggest reasons cited for the bearish turn is the uncertainty surrounding the U.S.-China trade war. While optimism for an impending deal seemed to be on the rise just weeks ago, those hopes were dashed when President Trump announced that tariffs on certain Chinese goods would increase from 10% to 25%, leading Bejing to retaliate with similar tariff increases on imports. The impact trade was having on business sentiment was also listed as a reason for the revised growth estimate along with global economic slowing.

Elsewhere the economists are also now changing their outlook for what the Federal Reserve’s next move will be. Instead of betting on an increase, they now state that the Fed could either raise or cut rates. As they explained, “We still sense little appetite on the FOMC for an insurance ease to goose inflation, but we see rising odds of ‘your father’s rate cut’: one prompted by downside growth risks.”

While the opinions from these JP Morgan economists may not represent the overall sentiment, it seems the group isn’t alone in their assertions. CNBC notes that the Federal Reserve Bank of Atlanta’s “GDP Now” tracker’s latest estimate showed 1.3% growth for Q2. Of course this doesn’t mean that there couldn’t be another surprise in store when the official GDP report is released nearly two months from now. Until then expect much more speculation on trade implications, Fed decisions, and a potentially slowing U.S. economy.

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Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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