Economists are raising 2018 growth projections after a strong second quarter, but disputes with U.S. trading partners, a fading boost from fiscal stimulus and rising short-term interest rates lead many to believe the boom won’t last much beyond that, according to The Wall Street Journal.
The average estimate for economic growth this year increased to 3%, up from projections of 2.9% last month and 2.4% a year ago, according to The Wall Street Journal’s monthly survey of private economists. They also see the unemployment rate falling to 3.6% by June, which would be the lowest unemployment rate in nearly 50 years. The jobless rate in July was 3.9%.
Consumer spending and business investment were robust in the spring, thanks in part to tax cuts that put more money in household pockets and gave businesses a higher after-tax return on their investments.
“The tax cuts and jump in federal spending will keep the economy buzzing for another 12 months,” said Bernard Baumohl, chief economist of the Economic Outlook Group. “Beyond that, however, I expect to see dark clouds forming that would signal a recession is near.”
Baumohl isn’t alone in predicting a slowdown after the boost from last year’s tax cuts begins to fade and because rising tariffs between the U.S. and its trading partners could lead to repercussions for the economy. Businesses that were enthused about the tax relief could hold off hiring and investing in the face of trade uncertainty, several economists said.
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