US: Briefing sheet

Content Type
Country Data and Maps
Economist Intelligence Unit
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Politics, Summary, Outlook, Briefing sheet
Political Geography
United States

Political and economic outlook

  • Policymaking will remain erratic for the remainder of Donald Trump's time in office as he drives his own agenda. The November 2020 presidential election is Mr Trump's to lose, but he could still win a second term if pitted against an equally polarising Democratic candidate.
  • The impeachment process launched in September 2019 is a risk to Mr Trump. The Economist Intelligence Unit expects the House of Representatives to impeach him, but unless he loses support from Republican voters, Senate Republicans are likely to vote to acquit him.
  • Real GDP growth is forecast to slow to 1.7% in 2020, from an estimated 2.3% in 2019, largely owing to trade policy uncertainty and slowing global growth. We expect GDP growth to recover modestly thereafter, to an average of 2% a year in 2021-24.
  • The Federal Reserve (Fed, the central bank) has cut interest rates three times in 2019. We expect the Fed to make a final, 25-basis-point rate cut in March 2020, as trade policy uncertainty and softer external demand continue to weigh on US investment.
  • The fiscal position will deteriorate in 2020-21 as the 2017 tax cut curbs revenue growth and public spending rises. We expect the deficit to narrow slightly as a share of GDP in 2022-24, but it will remain wide by historical standards, owing to lower income growth.
  • The US dollar has appreciated against the euro during 2019, and we expect it to remain firm in 2020 as economic growth in the euro zone continues to lag that of the US. The dollar is forecast to depreciate gradually in 2021-24 as euro zone economies strengthen.
Key indicators
  2019a 2020b 2021b 2022b 2023b 2024b
Real GDP growth (%) 2.3 1.7 1.8 2.0 1.8 2.2
Consumer price inflation (av; %) 1.8 1.7 1.9 2.1 1.8 1.8
Government balance (% of GDP)c -4.6 -5.0 -4.2 -3.8 -3.7 -3.5
Current-account balance (% of GDP) -2.4 -2.7 -2.7 -2.5 -2.4 -2.2
Money market rate (av; %)d 2.2 1.5 1.6 1.8 2.2 2.3
Unemployment rate (%) 3.7 4.1 4.0 4.2 4.5 4.4
Exchange rate US$:€ (av) 1.12 1.13 1.16 1.21 1.24 1.24
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Federal government, financial year (October-September). d Rate for firms with AA rating.

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Key changes since October 23rd

  • We expect the Trump administration to walk back from its threat to impose a 15% tariff on its remaining imports from China in mid-December. This policy shift will provide more support to consumer spending in late 2019 and in 2020 than we had previously expected.
  • We now estimate that real GDP will have expanded by 2.3% in 2019 (from 2.2% previously), reflecting stronger than expected third-quarter growth and higher than previously expected consumer spending in the fourth quarter.
  • We have revised up our real GDP growth forecast for 2020 to 1.7% (from 1.6% previously), mainly to reflect the revised outlook for private expenditure. However, a possible resurgence in US-China trade tensions presents a downside risk to this forecast.
  • Owing to the upward revision in the 2020 GDP forecast, we have lowered slightly our forecast for the unemployment rate, to 4.1% (from 4.2% previously), and have increased that for inflation, to 1.7% (from 1.6% previously).
  • We still expect the Fed to cut interest rates once more, in March 2020. Yet risks have increased that the Fed will keep rates on hold in 2020, particularly if the US-China trade deal, likely to be signed in December, provides a bigger market boost than we currently expect.

The month ahead

  • December 6th-University of Michigan consumer sentiment index (early December): This will be the first reading of US consumer sentiment in December, a critical h0liday shopping period. We expect a slight month-on-month increase, provided that the US postpones the final round of import tariffs on Chinese goods, due on December 15th.
  • December 20th-Real GDP growth (Q3, final estimate): The US Bureau of Economic Analysis revised up its second estimate of third-quarter GDP growth, published in late November, to 2.1% (from an initial estimate of 1.9%). If confirmed in December, this would be a clear sign of the resilience of consumer spending in the face of trade concerns.
  • December (TBD)-Signature of a US-China trade deal: We expect the US and China to sign a limited, phase-one trade agreement in December, avoiding further tariffs and providing support to US consumers in 2020. Yet recent human rights legislation passed by the US Congress has been poorly received by China, and could derail the deal.
  • December (TBD)-Results of the House impeachment enquiry: Senior House Democrats have said that they intend to wrap up the enquiry by end-2019, at which point the House Judicial Committee is likely to draft articles of impeachment. The Senate is likely to acquit Mr Trump, provided that his public approval ratings remain steady.

Major risks to our forecast

Scenarios, Q4 2019 Probability Impact Intensity
The US falls into recession Very high High 20
Mr Trump leaves office before the end of his term in 2020 High Very high 20
The US imposes tariffs on automotive imports High High 16
Partisanship in Congress completely handicaps policymaking Very high Moderate 15
The US engages in direct military conflict with Iran Moderate Very high 15
Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. Risk intensity is a product of probability and impact, on a 25-point scale.
Source: The Economist Intelligence Unit.

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