Economist: Little Evidence Economic Growth, Consumer Spending Will Gain Momentum in Early 2020
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As 2019 comes to a close, U.S. economists are signaling a tepid start to the year ahead.
Releasing its monthly Consumer Confidence Report, the Conference Board today found the index decreased marginally in December, following a slight increase in November. The Index now stands at 126.5, down from an upward revised 126.8 in November.
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December’s slight dip follows a year of frenetic change across retail marked by a protracted trade war that introduced new tariffs and tempered retail margins, thousands of store closures and a spree of c-suite shake-ups. Meanwhile, U.S. unemployment continues to hover near historic lows, landing at 3.5% in November. A low jobless rate has been a boon for some American workers — with 47% indicating jobs are ‘plentiful’ compared with 44% last month — but has also yielded challenges by way of labor shortages for companies. And, some workers are still leery of their job prospects: Consumers claiming jobs are “hard to get” also increased modestly, from 12.4% to 13.1% this month.
Lynn Franco, director of Economic Indicators at The Conference Board, noted that consumers’ assessment of current conditions improved in December but their expectations declined, “driven primarily by a softening in their short-term outlook regarding jobs and financial prospects.”
“While the economy hasn’t shown signs of further weakening, there is little to suggest that growth, and in particular consumer spending, will gain momentum in early 2020,” she added.
Specifically, per the Conference Board, the Present Situation Index — based on consumers’ assessment of current business and labor market conditions — increased from 166.6 to 170 this month. Meanwhile, the Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — decreased from 100.3 last month to 97.4.
Nevertheless, the percentage of consumers expecting business conditions will improve over the next six months increased slightly from 18.6% to 18.9%, while those expecting business conditions will worsen declined from 11.4% to 9.3%.
What’s more, there could be other causes for optimism into 2020: President Donald Trump’s contentious trade war with China could be nearing a turning point. The South China Morning Post reported Monday that Chinese Vice Premier Liu He, the country’s top negotiator, will travel to Washington, D.C., this week to sign the “phase one” trade deal with the U.S. The newspaper, citing a source briefed on the matter, said China has accepted the U.S. invitation for a deal-signing in Washington, and that the Chinese delegation will stay in the U.S. for “a few days.”
Over the past year and a half, the U.S. and China have imposed billions of dollars in tit-for-tat duties on one another. America currently has in place a 25% tariff on roughly $250 billion worth of Chinese products and a 15% levy on an additional $111 billion. The U.S. has also been embroiled in a tariff dispute with the EU since President Donald Trump over a year ago slapped 25% tariffs on imports of steel and 10% on those of aluminum — a move he asserted would provide protection for American industrial workers. Washington also imposed duties on $7.5 billion worth of European goods in October and Trump threatened to tax $2.4 billion worth of French products early this month in retaliation for France’s new digital services tax.
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