BLOOMINGTON, Ind. – Business investment has dried up due to uncertainty over trade tensions, but consumer spending remains strong and has kept the U.S. economy moving forward.

Consumer spending is the most critical component of the economy, since it drives nearly 70% of GDP. If it should take a turn, look out. That was the warning from Bill Witte, macro economist for FTR, during a State of Freight webinar Nov. 14.

“Right now, it has come off from where it was eight to nine months ago, but it was really high then,” Witte said of consumer consumption. “It hasn’t come off a whole lot, and it has been pretty stable over the last several months, so things are still pretty healthy there.”

Consumer confidence is being driven by a strong labor market and rising wages. If consumers should lose faith, the economy could feel the impact in a hurry, Witte warned.

“Confidence can change in a heckuva hurry,” he said.

There’s also little room for upside growth when it comes to the consumer, since their confidence is already sky high.

“There’s not much upside on the consumer picture,” said Witte. “There’s more downside risk if consumer confidence takes a dive.”

Business sentiment is not likely to improve until there’s clarity around global trade, Witte explained.

Looking ahead to 2020, Witte said it’s difficult to create a model-based forecast because the trade tensions seen today haven’t been seen since the 1930s. He is calling for some softening of the labor market and a slight downtick in labor participation and rise in unemployment, largely attributable to demographics.

Witte is projecting the deceleration in economic growth to continue for another couple of quarters, with trade tensions remaining a headwind into mid-2020. If the trade situation improves, the economy should also improve.

However, Witte said his outlook has become more pessimistic after factoring trade issues into his forecast. Key risks include the worsening of trade tensions, and weakening global economies. Another concern is fiscal policy; Witte said government spending and tax breaks have run their course. Budget deadlocks could be expected given the current political environment in the U.S. Witte also cited general government dysfunction as a worry, noting impeachment hearings are “a disruptive kind of activity.”

Eric Starks, chairman and CEO of FTR, agreed with Witte’s assessment. He pointed to the ISM Manufacturing Index, which is contracting, and industrial production, which has flatlined.

“It suggests that freight has kind of hit a plateau, but is still at very high levels,” Starks said.

Business leaders are “sitting on the sidelines,” Starks said. “What businesses want is some predictability and ability to plan. In the absence of that, you stay with the status quo.”

Business inventories have climbed, which could restrain GDP growth through the first half of next year.