Latest economic data, while still positive, suggest slower growth ahead. Time for caution.

The Bureau of Economic Analysis released new estimates of GDP growth, revised slightly downward from previous estimates. 

Real gross domestic product (GDP) increased at an annual rate of 3.4 percent in the third quarter of 2018 (table 1), according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 3.5 percent. With this third estimate for the third quarter, personal consumption expenditures (PCE) and exports were revised down, and private inventory investment was revised up; the general picture of economic growth remains the same.

Slowing, but still better than recent years, as the graph below shows.

But as we’ve written previously, this is a time for caution in state fiscal policy, after nearly a decade of rapid budget growth.

Other economic data point to continued growth as well. The Associated Press reports consumer spending is up slightly, while personal income growth is slowing.

Americans lifted their spending 0.4 percent in November from the previous month, a moderate gain that should sustain steady economic growth.

Personal incomes rose 0.2 percent, down from 0.5 percent in the previous month, the Commerce Department said Friday.

And,

Business spending is showing signs of slowing, leaving more of the burden on consumers to power the economy. A gauge of business investment in large equipment such as machinery and computers fell in November for the third time in four months, according to a separate report Friday.

There are also signs of a possible slowdown in manufacturing.

Orders to U.S. factories for long-lasting goods rose at a modest pace last month, but the gain was driven entirely by demand for military aircraft. Excluding transportation equipment, orders fell.

The Commerce Department said Friday that durable goods orders rose 0.8 percent in November, following a sharp fall of 4.3 percent the previous month when orders for commercial and military aircraft plunged. Orders in November, excluding transportation, dropped 0.3 percent. A category that reflects business spending plans declined 0.6 percent, the third drop in four months.

The figures suggest that U.S. factory output, while mostly solid for now, may slow in the coming months.

The AP reports,

Economists believe that economic growth is slowing in the fourth quarter to around 2.5 percent. For the full year, GDP growth is projected to top 3 percent — the best showing since 2005.

President Donald Trump has often cited the upturn in economic growth as evidence that his economic program, which includes a $1.5 trillion tax cut passed last year, has lifted the economy to a stronger growth path.

However, analysts believe that the boost from the tax cut and increased government spending Congress approved last February will begin to fade in 2019. They are forecasting growth will slow to around 2.7 percent in 2019. Some analysts believe that by 2020, GDP growth may be barely above 1 percent or could slip into a recession that year.

And for those who watch the stock market for signs of the coming recession, we’ll close by recycling this from Brian Domitrovic in Forbes.

The stock market has predicted nine of the past five recessions—a joke from master Keynesian of decades ago Paul Samuelson. Samuelson’s great rival on the supply-side, Wall Street Journaleditorial maestro Robert L. Bartley completed the thought, when he quipped, and in the other four, Washington got the message and mended its ways in time.

The question that all but appears to us today is: is this one of the five or one of the four?

Good question. And one that should lead state lawmakers to a cautious approach to the next state budget.