California economy is slowing due to US-China trade war, housing costs: report

California is losing its edge in economic growth as trade disputes with China and grim statistics from the state's housing market continues to weigh down its economic momentum, according to a new forecast.

"Unlike the recent past when California exceeded national growth, we expect California to see GDP growth roughly in line with the national average," reported the Los Angeles County Economic Development Corp (LAEDC), a nonprofit established by the Los Angeles County Board of Supervisors, in its annual economic forecast, which came out Wednesday.

According to the LAEDC, while the real GDP growth for the US was a steady 2.9 percent in 2018, the California economy expanded by 4.3 percent and the Los Angeles County's climbed 3.7 percent. In 2019, the national economic growth slowed to 2.3 percent, while the Golden State's GDP growth fell to a 2.6 percent and Los Angeles County's dropped to 1.6 percent.

The organization expects this downward trend to continue, with a forecast of 2 percent for the state's GDP growth in 2020 and a 1.6 percent the following year. The national economy, on the other hand, will continue to grow at or slightly below the 2 percent mark.

LAEDC noted that California was still ranked among the top five states in terms of fastest growth in 2018. But as of the third quarter of 2019, "California appears more susceptible to the national slowdown relative to other states, ranking only 23rd in terms of quarterly growth," it said.

Several factors contributed to the slowdown. The trade war between the US and China was a main driver behind national and economic uncertainty as well as business confidence erosion, the LAEDC economists said.

"Notwithstanding its intent, the trade spat with China has not improved the trade balance," they added.

While US trade with Mexico and Canada has increased, exports to Chinese mainland and Hong Kong have declined 0.6 percent and 18.2 percent, respectively, year-over-year.

"Often said throughout 2019, one key word remains entering into 2020: uncertainty," the study said. "Continued growth at the national level will rely on many key factors. One will be the ongoing thaw in relations between the United States and China with regard to trade."

A successful implementation of a "phase one" deal will enhance the bilateral trade and investment relationship, said the report, while a "phase two" deal, and any other subsequent deals, which replace tariffs with rules and threats with treaties and cooperation will help solidify domestic and international growth in the new year.

Along with the trade war, regional issues such as the ongoing housing market crisis and domestic outmigration also played a key role in the slackening growth of California's economy.