https://www.asiatimes.com/2019/11/article/weak-consumer-economic-slump-could-sink-trump-re-election-bid/
US President Donald Trump’s case for re-election in 2020 comes down to his economic record. New forecasts from two Federal Reserve banks, though, warn of near-recession conditions just as the presidential election campaign is getting underway.
Both the New York Federal Reserve “Nowcast” model and the Atlanta Federal Reserve’s “GDPNow” model predict that US economic growth will slow to barely above zero during 2019’s fourth quarter. Both models translate the latest data releases from government agencies into overall GDP growth. The NY Fed’s forecast stands at 0.4% annualized GDP growth and the Atlanta Fed model shows just 0.3%. This degree of convergence is rare, and the dip from an estimated 1.9% growth rate during the third quarter to 0.3%-0.4% is alarming.
Eighteen months ago the Trump Administration advertised the Atlanta Federal Reserve’s forecast as proof of its success. Treasury Secretary Steve Mnuchin told CNBC in June 2018, “The Atlanta Fed is projecting 4.7% [GDP growth]. I have no idea whether it will be that high. But a year ago, people were laughing when we talked about 3% GDP. We have an economy that’s here because of the president’s tax plan and the president’s regulatory relief.”
The administration isn’t bragging about the Atlanta Fed’s present forecast of just 0.3% annualized GDP growth.
Since then GDP growth has fallen below 2%, as businesses cancel capital investment plans in response to uncertainty about global supply chains, following the Trump Administration tariff war on China and threatened bans on technology exports to Chinese companies. Consumer spending kept the economy growing despite shrinking CapEx and a manufacturing recession that is now in its third quarter. At just 12% of GDP, the manufacturing recession isn’t enough to tip the overall economy into recession.