US fourth quarter GDP was up a mere 2.1%, unchanged from the preceding three-month period. The main drivers behind the modest growth were consumer and government spending, as well as residential fixed investment and exports. Interestingly, home sales, both new and used homes, during the quarter were not very strong and exports were up despite the continued trade disputes between the US and major trading partners like China. Negative contributors were private inventory investment and non-residential fixed investment.

Inflation has remained low. The PCE was up a mere 1.6% in Q4, down from a 2.1% advance in the prior three-month period. Consumer price inflation climbed to 2.3% y/y in December 2019 from 2.1% in the previous month and in line with market consensus. That was the highest rate since October 2018, boosted by a sharp rebound in energy costs

Full year GDP posted a weak expansion of 2.3%, the smallest growth since 2016 and again missing the administration’s target of 3%. First quarter 2020 probably will be a repeat of the fourth quarter. Indeed, it is entirely possible that the near-term outlook remains soft and could be a precursor of a recession coming in 2020.