CHICAGO, Nov. 15 (Xinhua) -- While the U.S. economy performs strongly this year thanks largely to federal spending and tax cut, their effects will start to diminish in 2019 before fading out in 2020, according to an annual economic forecast released by the University of Michigan (U-M) on Thursday.
The U.S. economy is expected to expand 2.9 percent for the year 2018 after a strong 3.5-percent growth rate in the third quarter.
U-M economists projected that overall economic output growth, as measured by real gross domestic product (GDP), will register another solid year with 2.7-percent growth in 2019. Growth will slow to 1.9 percent in 2020 as the economy cools.
Large boosts in federal spending in 2018 and early 2019 along with business fixed investment, which grew after the Tax Cuts and Jobs Act, helped the economy rev up this year.
Job growth is expected to slow a bit to 2.3 million jobs in 2019 before decelerating to 1.7 million in 2020.
The annual unemployment rate will continue to drift down from an average of 3.9 percent this year to 3.5 percent in 2019 and 3.4 percent in 2020.
Inflation is likely to remain near the Fed's 2-percent target. Consumer Price Index is projected to register 2.0-2.1 percent in 2019-2020.
Consumption is expected to grow by 2.6 percent in 2019, and then by 2.2 percent in 2020 as interest rates rise.
Mortgage rates will keep heading up to 5.1 percent for a conventional 30-year mortgage by the end of 2019 and 5.3 percent a year later. Interest rates on the federal government's debt will also rise. By the end of 2020, the 3-month Treasury bill rate will rise to 3.2 percent and the 10-year Treasury bond yield will reach 3.6 percent.
The forecast, produced annually by the Research Seminar in Quantitative Economics in the U-M Department of Economics since 1952, was prepared by U-M economists Daniil Manaenkov, Aditi Thapar and Gabriel Ehrlich and researchers Owen Nie and Jacob Burton.
