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US Economic Forecasts Reinforce Car Market ‘Soft Landing’


Forecasts for economic growth in the US are being revised up following corporation tax cuts that are also boosting investment spending by US companies. The short-term boost to the domestic US economy will support car demand at a time when analysts say some cyclical downturn to vehicle sales in the US is to be expected.

In its latest round, the International Monetary Fund (IMF) forecast for US real GDP is 1.2% higher by 2020 than in a projection without the latest tax policy changes. The US growth forecast has been raised from 2.3% to 2.7% in 2018, and from 1.9% to 2.5% in 2019. The IMF estimates US economic growth at 1.5% in 2016 and 2.3% in 2017.

The US light vehicle market has topped out at over 17m units, dipping slightly in 2017 - which was the third year in a row of sales above 17m units. Analysts predict that the market is heading for a further dip in 2018. The latest forecasts point to a continued 'soft landing' for the car market as the US economy continues to show good growth, but with interest rates low and employment levels  high.

However, the latest economic projections from the IMF come with the caveat that the US trade deficit will widen as higher demand sucks in imports. That could create consternation in the White House and up the stakes on potential trade conflict with other countries (this week the US imposed tariffs impacting white goods and components - mainly imported from China and South Korea).

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