By Steve Scranton, Senior Vice President,
Chief Investment Officer & Economist at Washington Trust Bank
The US economy demonstrated that fundamentals won out over the noise and drama of politics. Stimulus from the Tax Cut and Jobs Act provided the boost needed to get economic growth (as measured by GDP) to 2.9% compared to the average for this business cycle of just over 2%.
The key for economic growth to maintain that pace rests in two areas:
1. Additional fiscal stimulus
If Congress and the Administration can find a way to work together to pass additional legislation that supports economic growth then it is possible to achieve 3% growth. Odds of this happening appear low. There appear to be more things that they can fight over rather than work together.
2. Increased spending by business
Given the age of this business cycle, the key for faster growth is increased capex spending by businesses to increase productivity. The Tax Cut and Jobs Act provided an incentive to do this via the 100% expensing allowance. Unfortunately, the fighting in Congress, tariffs and talk of repealing some of the business tax cuts by Democrats have caused businesses to take a “wait and see” posture. The announcement of new tariffs will not help that sentiment.
The citizens, businesses and government of Spokane should give themselves a round of applause for the success that Spokane experienced in 2018. Spokane is becoming recognized regionally and nationally as an affordable place to live and a good place to do business. Not only did Spokane see announcement of several larger companies announcing plans to locate in Spokane but the evidence shows that individuals and small businesses are also choosing Spokane. Jobs growth remains solid and Spokane achieved a new record high for employment in 2018. With success though, comes growing pains. The challenge for everyone in Spokane is to support the need to grow infrastructure to support the growth. The reality is that this will probably mean supporting tax measures to fund the infrastructure build out (i.e. housing, roads, schools, etc.). Without support for infrastructure, Spokane risks the same traffic jams, housing shortages and affordability issues that bigger cities are facing now.
2019 should be another positive year of economic growth with both opportunities and challenges facing both the US and Spokane. Now is the time to plan for when times slow or move into recession. We can never truly know when the bad times will arrive so, planning in advance will ensure that you are prepared and ensure that you continue to prosper going forward.