Economic growth in the United States will drop to 2 percent this year, down from 2.3 percent in 2019, as global growth spikes from 2.9 to 3.3 percent, according to new estimates from the International Monetary Fund (IMF).
“Market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-deal Brexit,” the IMF wrote in its most recent World Economic Outlook.
While global conditions step back from the brink, the United States is set to continue moderating, as the stimulus from from the 2017 GOP tax law runs out.
The Euro area, in the meantime, is expected to barely increase growth to 1.3 percent, up from a paltry 1.2 percent, as manufacturing in Germany continues to contract and demand in Spain remains sluggish.
One of the key reasons the IMF cited for a more rosy overall outlook was the pause in President Trump‘s trade war with China, signified by last week’s signing of the “phase one” interim U.S.-China trade deal. Trump hopes a strong economy will help boost his chances of reelection come November.
But the fact that the overall trade war remained unresolved, along with new risks to oil supply over tension with Iran and an acceleration of climate-related disasters remained significant risks, the IMF noted.