Monthly Macro Manual
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We have scaled back our forecast for 2019 U.S. real GDP growth to 2.6%. Personal consumption growth appears to have bounced back in Q2, and government purchases continue to grow solidly. But, business fixed investment growth appears tepid, and residential construction spending continues to contract.
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Our forecast for the fed funds rate has changed. We now expect one 25 bps cut in July 2019, one 25 bps cut in Q4-2019 (probably October) and then no further changes to policy through the end of 2020. Both domestic and global growth have slowed, and softer inflation has pushed up the real federal funds rate. With limited fears about the Fed being "behind the curve" and less available ammunition than in prior expansions, we think the Fed is likely to proactively deliver two "insurance" cuts to forestall a sharper deceleration in GDP and prices. Our 2019 year-end target for the 10-year Treasury yield is 2.30%.
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Global growth has weakened across the board. Our forecast for global real GDP growth in 2019 is 3.2%, which, if realized, would match 2016's pace for the slowest since the Great Recession. Another escalation in the ongoing trade spat, should it occur, could push global growth to lows not seen in a decade.
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