Global growth is expected to slow next year according to a recent report by Moody’s, driven in part by an expected deceleration of growth in the U.S. (U.S. Real GDP growth of 2.9% this year is expected to fall to 2.3% next year and 1.5% by 2020). Underpinning this global growth forecast is higher interest rates throughout the world, as many central banks (most notably the U.S.) are raising short-term rates and reversing a decade of easy-money policies.
In the U.S., the deceleration in growth is also due to the shortage of workers, with 3.7% unemployment leaving too few available workers to fuel business expansion. While Moody’s does not forecast a recession by 2020, we may be re-entering a slower growth environment, both for the economy and company earnings.
Jeffrey Viksjo, CFA