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January Monthly Dashboard: economic growth trends up heading into 2020 despite trade and geopolitical risks

January 24, 2020
  • January current scorecard
  • January future scorecard

Monthly Review (Page 3)

The economy ended 2019 on a positive note while downside risks have receded a bit, which should help to carry the recent solid momentum into 2020. Over 550,000 jobs were added in the fourth quarter with more workers participating in the labor market and finding full-time work — all positive signs for continued consumer spending this year. Housing remains a bright spot as strong demand drivers and low mortgage rates have lifted sales (especially for new homes) and home building activity. The business sector continues to be bifurcated with the service sector expanding solidly while manufacturing contracts. But there are signs that manufacturing activity has bottomed and the phase one trade deal with China removes some uncertainty for businesses in the near-term. Broad U.S. stock indices rode the positive geopolitical and economic news to record highs, a further boost to household net worth. Still, recent tensions with Iran highlight that the geopolitical and trade environment remains highly unsettled and could cause further disruptions.

Outlook (Page 4)

The general mood for the economy and financial markets at the start of 2020 is decidedly more optimistic than just a few months ago. The normalization of the yield curve and a downshift in trade tensions with the signing of the phase one trade deal between the U.S. and China have helped to reduce downside risks for the economy. Consumer spending, the backbone of economic growth, is expected to remain solid this year led by continued job gains and a favorable market for workers which is boosting incomes. Still, as evidenced by the flare up with Iran, geopolitical risks remain while the 2020 elections are likely to add to volatility later this year. Moreover, the trade disruptions and in place tariffs from the past two years will have an extended drag on global growth and the manufacturing sector in the U.S. even if there is no further escalation in tariffs or non-tariff barriers to trade. This backdrop likely sets the stage for further solid growth at least through 2020, albeit at a more subdued pace with more volatility and uncertainty than usual.

Go deeper with the full January dashboard linked below.