The latest release of GDP statistics in the US confirmed that the world’s largest economy was able to sustain a pace broadly matching its trend-growth in 3Q19, as the annualised rate of real GDP growth hit 2.1%. The print proves bearish investors wrong, whose long-standing view had envisioned the US slipping into a recession in 2019-2020 (implied by the shape of the Treasury curve months ago, incorrectly so far). It was no surprise that household spending was one of the key drivers of economic activity. However, the fact that business investment activity was stronger than estimated by most (although there is still room for improvement) shows that the US’ economy is more resilient to external headwinds (such as the trade tensions) than what the broad market implied a couple of months ago. Looking forward, household spending will remain the backbone of GDP growth in the US, in our opinion. Based on the currently available macroeconomic data, we believe that the US will be able to grow around 2% in 2020, as the jobs market remains hot and monetary policy is very likely to remain supportive. Whether the actual GDP growth number will be over or under 2% at the end of 2020 will depend on how the US-China trade negotiations progress and if world trade volumes recover.
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