From all indications, economic growth over the next year will be slower than in the last year. In July, citing trade-war weakness, the International Monetary Fund cut its 2019 growth estimate for the world economy from 3.3% to 3.2%, though it does expect some bounce-back next year. Looking more specifically at countries and regions that together form more than half of the world’s economy, it expects 2019 real GDP growth in the United States of only 2.6%, slowing to 1.9% in 2020. In both the EU and United Kingdom, it expects 1.3% for 2019. In Japan, it expects less than 0.9%.
This is important information for government units, firms, and organizations that think on a grand scale — but most people I know are more interested in what’s going on in their neighborhood. Unfortunately, there are no regularly published GDP data for zip codes and neighborhoods, but we do get data on state economic activity and what to expect in the days ahead.
Here, we see lots of variation. Some state economies are hot, others are cool, and many are just lukewarm.
The most recent of the Federal Reserve Bank of Philadelphia’s 50-state leading indicator maps, which forecast personal income growth six months from now, illustrate which states seem to be prospering the most and which are lagging. For comparison purposes, here are the June 2019 and June 2018 versions.
Focusing first on the June 2019 map, we see that heavy auto-producing states Kentucky and Michigan, perhaps seriously affected by Trump’s trade wars, seem to be headed toward a year-end recession. A comparison of the June 2019 map with its 2018 counterpart tells us which other states, while still enjoying economic growth, have lost some luster.
Consider the 2018 dark green states that turned lighter green in 2019. These include grain and pork producer/exporters, such as North Dakota, South Dakota, Missouri, and Minnesota. These are states where farmers lost access to the Chinese market. I also call attention to the reversal in fortune experienced by Ohio and Indiana, two states that were losing ground in 2018 but now are the light shade of green again. Here we see what can happen in just 12 months.
Overall, a quick look at the two maps also tells us that prospects were mostly brighter in June 2018 than in June 2019. This assessment matches what we know about the nation’s GDP growth, which has fallen most recently.
Recognizing this raises a serious challenge for candidates seeking to be elected in the fall of 2020. If the economy continues to be corroded by trade war actions, more dark green will turn pale, more pale green will turn tan, and the people will speak.
As a wise man once said, “It’s the economy, stupid.”
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
