US Outlook: Strong momentum going into the second half of the year - Wells Fargo

According to analysts from Wells Fargo, the economic expansion in the US still has plenty of fuel in the tank. They see a 3% GDP growth in 2019. 

Key Quotes: 

“The advance second-quarter GDP data not only showed the economy growing solidly in the second quarter but also showed that income growth has been much stronger over the past few years, which means the expansion has much more fuel in the tank than previously thought. Real GDP grew at a stout 4.1 percent pace during the second quarter. Moreover, the underlying details were even stronger than that blowout number, with real final sales surging at a 5.1 percent annual rate, as inventories were drawn down sharply.”

“While we doubt we will see another 4 percent GDP number in coming quarters, the economy clearly has strong momentum going into the second half of the year.”

“We also have 3 percent growth penciled in for 2019, which appears far more likely given the large upward revisions to income growth and doubling of the saving rate.”

“We do not see the yield curve inverting either this year or next year and envision the curve actually steepening modestly later this year.”

“While consumer spending, business investment and federal outlays may surprise us to the upside, Fed Chair Powell has warned that he has detected some loss in animal spirits among large businesses due to uncertainty surround trade negotiations, which raises the downside risks. We see the Fed sticking to its current course of modestly nudging the federal funds rate higher in September and December and currently look for two quarter-point hikes in 2019.”