US real GDP growth has fallen to 2.2%

Wells Fargo Research Team Wells Fargo

Developments since our August Monthly Economic Outlook

Our forecast for 2019 U.S. real GDP growth has fallen to 2.2%. The U.S. economy is showing clear signs of slowing, and while we believe economic growth is still far from entering negative territory, we only anticipate growth of about 1.5% over the next couple quarters. The consumer remains the key source of strength amid continued weakness in business fixed investment.

Our forecast for the fed funds rate has changed. In addition to the 25 bps cut we already had penciled in for September, we have added two more 25 bps cuts, in Q4-2019 and Q1-2020. The Fed seems intent on taking action to forestall a recession and return inflation to 2%, and as such we anticipate more easing in the absence of a major breakthrough on U.S.-China trade relations. Our 2019 year-end forecast for the 10-year Treasury yield is now 1.70%. For 2020, our year-end forecast is 2.05%.

Our initial forecast for 2021 sees real GDP growth in the United States of 2.0%, a fed funds rate that remains unchanged at 1.25%-1.50% and global real GDP growth of 3.2%. More complete 2021 forecasts can be found on slide 11.

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Wells Fargo Research Team

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