February 1, 2020 | Economic Outlook

Economic Outlook - February 2020

  1. The first estimate of fourth quarter real GDP growth was 2.1%, with positive contributions from consumption, government spending, home building, and exports, partly offset by negative contributions from inventories and nonresidential fixed investment. Consumer spending was much lower than in the third quarter, +1.8% vs. +3.2% in Q3. For the full year 2019, the economy grew 2.3%, which was the slowest growth in three years.

  2. US and China signed phase one of their trade deal on January 15 after almost two years of on-and-off trade talks. The Trump administration will ease some sanctions on China and Beijing will step up its purchases of U.S. farm products and other goods. Thornier issues such as the enforcement of forced technology transfer have been relegated to the second phase of the trade deal, which is not likely to be resolved until after the US presidential election.

  3. Sales of existing homes rose 3.6% in December. A strong employment backdrop is one factor supporting demand for home buying. The unemployment rate remained at 3.5% in December, a 50-year low. Another factor behind the strong housing market is favorable borrowing conditions: the average interest rate on a 30-year fixed mortgage was 3.65% as of January 16, according to Freddie Mac. The US housing market is facing a severe shortage of inventory. Limited housing stock has contributed to higher home prices this past year.

  4. President Trump has pressured the Federal Reserve to continue to cut interest rates, but the central bank opted to keep its benchmark rate in a range between 1.5%-1.75% at the FOMC meeting held in late January. Chairman Jerome Powell indicated that the Fed is on hold unless economic conditions change significantly.

  5. As investors weigh the economic impact from the spread of the coronavirus, increased demand for safe havens have pushed bond yields lower. The 10-year yield hit 1.52% at the end of January. Of note, treasury yields are now significantly below the fed funds rate at 1.75%.

  6. The Senate acquitted President Donald Trump on two articles of impeachment, rejecting the House’s charges that he should be removed from office for abusing his power and obstructing the congressional investigation into his conduct.

Sources: Bloomberg LLC, U.S. Commerce Department, Bureau of Labor Statistics, Dow Jones Inc., MarketWatch, Standard & Poors, Federal Reserve Bank, FactSet

Disclosure: This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.

If you would like to receive your copy of the Economic Outlook and Investment Review monthly in the mail, call Ed Sullivan, Vice President, at 617-557-9800, or email him at