Economy to grow 3.1 percent in 2018: CBO
The U.S. economy is expected to grow by about 3 percent in 2018 but could face “more substantial” effects in the coming months from the administration’s recent moves on tariffs, the Congressional Budget Office said Monday.
Real GDP is expected to grow by 3.1 percent in 2018 after hitting 4.1 percent growth in the second quarter as upward trends on consumer spending and agricultural exports that helped propel second-quarter growth are expected to either fade or reverse, CBO said.
The 3.1 percent projection is down slightly from an April estimate of 3.3 percent. CBO said the downward revisions compared to several months ago had to do with new, lower projections on federal spending.
The new report, completed in early July, had also estimated that macroeconomic consequences from the Trump administration’s recent moves to impose tariffs on certain imports - and the ensuing retaliation from other countries - would be “small,” CBO director Keith Hall said in a statement accompanying the report.
“However, trade policy has already changed since early July and may continue to evolve, so the effects of new tariffs may become more substantial and have a larger effect on the economy than CBO accounted for in its current projections,” Mr. Hall said.
In April, CBO had projected that the economy would grow by 3.3 percent this year and 2.4 percent next year before slipping back to below 2 percent by 2020.
Analysts said the GOP’s tax cuts and the recent two-year budget deal that boosted government spending in 2018 and 2019 will give the economy a short-term boost, but that the ensuing federal deficits will eat into that growth in the longer term.
Last week, CBO estimated that the federal budget deficit was $682 billion for the first 10 months of fiscal 2018 - $116 billion more than the shortfall had been over the same period last year.
The office has projected a budget deficit of $793 billion for fiscal 2018, which ends on Sept. 30.