According to the latest Economic Outlook published this week by BBVA Research, GDP growth has decelerated in 2Q2019, but a rebound in consumption should support moderate growth rates in 2H2019. Survey-based investment indicators are also declining amidst deteriorating business expectations. In addition, countervailing trade dynamics -- weaker global growth versus reduced trade tensions -- imply there will be no material change in the net export balance.
The unemployment rate held steady at 3.6 percent in May, and the labor force participation rate and unemployment-population ratio also remained unchanged at 62.8 percent and 60.6 percent respectively. The team anticipates job growth to continue with modest declines in the unemployment rate for the remainder of 2019. Average monthly job growth is expected to slow to 166,000 this year, down from 223,000 in 2018.
According to the report, the Fed is expected to cut rates in the third quarter 2019. This is based on elevated policy uncertainty, renewed cross-currents, and the threat of inflation drifting below the Fed’s two percent target.
Headline consumer prices increased 0.1 percent month-over-month in May, after rising 0.3 percent in April. The 12-month change in the headline consumer price index (CPI) slumped below 2 percent again to 1.8 percent, while the core CPI continued to decelerate, reaching 2.0 percent in May. In addition to the slowdown in energy prices, used cars and trucks, and motor vehicle insurance prices decelerated, dragging down headline CPI.
The June Economic Outlook, authored by BBVA Research Senior Economist Boyd Nash-Stacey, also features a view of the labor market, interest rates, oil prices, and inflation for 2019. For more details, read the full report here.