For US econ­omy, storm clouds may be on the hori­zon

Star-Telegram - - Business - BY BINYAMIN APPELBAUM

Emerg­ing signs of weak­ness in ma­jor eco­nomic sec­tors, in­clud­ing auto man­u­fac­tur­ing, agri­cul­ture and home building, are prompt­ing some fore­cast­ers to warn that one of the long­est pe­ri­ods of eco­nomic growth in U.S. his­tory may be ap­proach­ing the end of its run.

The econ­omy has been a pic­ture of health, ex­pand­ing at a 3.5 per­cent an­nual pace dur­ing the July-Septem­ber quar­ter and driv­ing the unem­ploy­ment rate to 3.7 per­cent, the low­est level in al­most half a cen­tury. But Gen­eral Mo­tors’ plans to cut 14,000 jobs and shut­ter five fac­to­ries re­in­forces other re­cent in­di­ca­tions that the bet­ter part of the ex­pan­sion is now in the rearview mir­ror.

“We’re in the 10th year of the ex­pan­sion, and there are some soft points,” said Ellen Hughes-Cromwick, a former chief econ­o­mist at Ford Mo­tor Co. and the Com­merce De­part­ment who is now on the fac­ulty at the Univer­sity of Michi­gan. “The auto sales cy­cle has peaked, and the hous­ing cy­cle also has peaked.”

Hughes-Cromwick said higher in­ter­est rates, com­bined with ris­ing in­fla­tion and fal­ter­ing cor­po­rate con­fi­dence, could set the stage for a re­ces­sion. In that sce­nario, she said, “I don’t re­ally see how the econ­omy can keep pow­er­ing ahead.”

The vast ma­jor­ity of prominent eco­nomic fore­cast­ers, in­clud­ing var­i­ous arms of the fed­eral gov­ern­ment and all of the ma­jor Wall Street banks, still re­gard con­tin­ued growth as the most likely outcome for the U.S. econ­omy in 2019. But there is a broad con­sen­sus that the pace of growth will slow as the sugar high pro­vided by the Trump ad­min­is­tra­tion’s $1.5 tril­lion tax cut and spend­ing in­creases be­gins to wear off. And some fore­cast­ers see a small, but grow­ing, chance of a re­ces­sion.

Pres­i­dent Don­ald Trump’s chief eco­nomic ad­viser, Larry Kud­low, tried to play down such con­cerns Tues­day, in­sist­ing that the over­all health of the econ­omy re­mained ro­bust.

“There’s a cer­tain amount of pes­simism I’m read­ing about, maybe it has to do with a mild stock mar­ket cor­rec­tion,” Kud­low said, be­fore de­scrib­ing such pes­simism as mis­placed. He rat­tled off re­cent eco­nomic data – in­clud­ing the most re­cent jobs re­port, which he de­scribed as “very spiffy” – to high­light the strength of the U.S. econ­omy, be­fore his con­clu­sion: “We’re in very good shape.”

In­vestors are show­ing signs of con­cern about the abil­ity of the cor­po­rate sec­tor to main­tain sky­high lev­els of prof­itabil­ity.

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