CSCMP's Supply Chain Quarterly
July 16, 2019
Forward Thinking

Trade, global economic headwinds dampen outlook

U.S. economy to perform well in 2019, but uncertainties cloud the longer term outlook, economist says.

The U.S. economy will remain strong in 2019, but the longer term outlook is questionable due to uncertainties surrounding trade and other global economic issues, economist Dr. Don Ratajczak told attendees during a transportation industry conference in Atlanta January 30.

Ratajczak, a consulting economist at Georgia State University, said he expects U.S. economic growth of 2.7 percent this year despite moderating conditions and a worsening outlook among consumers and business leaders. He spoke to a crowd of transportation industry professionals at Jump Start 19, an educational conference sponsored by Atlanta-based freight-pricing firm SMC3. The conference was held January 28-30 at the Renaissance Waverly Atlanta.

"The economy is in okay shape, but there is a lot of uncertainty," Ratajczak said, pointing to tariffs and trade concerns, a slowing Chinese economy and Brexit, among other issues. "These are the problems we are facing."

Much of the 2019 outlook hinges on trade concerns, especially a potential new round of tariffs on $200 billion worth of Chinese goods. The latest round was supposed to take effect January 1, but in December the Trump administration delayed their implementation for 90 days as it continued trade talks with China. Although business leaders in transportation and logistics remain anxious about the new March 1 tariff deadline, Ratajczak said he is "60 percent" optimistic that the United States and China will reach a trade deal and the tariffs will not take effect. That's largely because China's slowing economic conditions are likely to put it in a position to negotiate, he added.

"Their economy is struggling [so] they are in a position that they may wish to deal," Ratajczak said. "I'm optimistic, but not terribly optimistic."

Trade issues continue to top transportation industry leaders' economic concerns. Nearly 57 percent of attendees said the United States' trade dispute with China has affected their supply chain at least "a little bit," according to a poll of audience members during the final sessions of Jump Start 19. A quarter of respondents said the dispute has not affected their supply chains at all, and 17 percent said the dispute has had a considerable effect.

Such issues may dampen the longer term U.S. outlook as well, Ratajczak said. He pointed to the potential for a very "questionable" second half of 2020 in particular—especially, he said, if tariffs continue to rise. Slowing conditions in China and elsewhere around the world, as well as moderating growth here at home, will also play a part.

In a separate audience poll, SMCasked attendees to gauge the risk of a recession over next few years. Fifty percent of attendees said they expect the U.S. economy to enter a recession in 2021 or later,  40 percent said they expect a recession in 2020, and just 10 percent said they see a risk of recession this year.

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