PNC economist expects continued, yet slowed growth in 2019 and 2020
The U.S. economy is at a critical juncture but should see continued yet slowed growth in 2019 and 2020, a top economist for PNC Financial Service Group said Tuesday. And Michigan, he believes likely will follow those national trends.
During his biennial address to the Detroit Economic Club, Stuart Hoffman, PNC senior economic adviser, gave a "cautiously optimistic" outlook on the future of economic trends. The forecast comes despite headwinds from trade wars, increasing gasoline prices, softening automotive sales, fewer housing starts and global economic pressures.
"Some would think that’s where we are headed, that we're on our last legs," Hoffman said during a meeting at Detroit's Westin Book Cadillac Hotel. "I don’t agree. But the next three or four months will be a decisive time."
Although some economists predict a recession could take place by the end of the year, Hoffman forecast the nation would break the 10-year economic expansion record of the 1990s this year with 2 percent growth of the gross domestic product. He anticipates the addition of 2 million jobs in 2019 compared to 2.6 million in 2018. U.S. automotive sales were projected to be 17 million this year, shy of the 17. 3 million last year.
Although he predicted the first quarter of the year to grow around 1 percent, Hoffman said that with the Federal Reserve maintaining interest rates and the possibility of a Chinese trade deal in the coming weeks, the economy could expand more quickly — though likely not at the approximately 3 percent rate from 2018 that President Donald Trump wishes to see.
"It's the story of the tortoise and the hare," he said. "This is more of a tortoise expansion. It's gone on slowly but persistently."
Hoffman's largest reason for optimism is American consumers. Their consumer confidence has rebounded with the stock market since declining in December, and they are saving more. Additionally, aging millennials are spending more as they buy homes and have children.
"The American consumer is the 800-pound gorilla in the room," he said. "Watch what they do."
Last week, the Fed decided it would not change interest rates, despite Trump's calls for decreases to spur economic growth. There remains the possibility the Fed could lower rates later this year.
"That’s not in our forecast," Hoffman said. "That would be a bad sign if they lower rates six to seven months from now. For the very first item in the 39 years I’ve been in PNC I would be wrong."
Detroit Economic Club members said the economist's presentation provided some reassurance.
"I don't mind the moderate growth he said he expects over the next 12 to 18 months," said Chris Valmassoi, head of global treasury for Farmington Hills-based automotive supplier Neapco Holdings LLC. "It's slower, but I think 2 to 2.5 percent is a good thing. It's not down."
David Hamm, treasury director for Nevada-based EP Minerals LLC, agreed: "I actually prefer (moderate growth). I don't like it when it swings up and down. I think we're in a good place."