With Trump set to be president, Economists are continuing to weigh in on what they believe the outlook for economies will be over the next four years. They are currently anticipating higher GDP, higher inflation, and higher interest rates.
Unemployment has been forecasted to remain within a few percentage points of full unemployment. The average amount of job growth has been slowing over the past few years and is expected to continue along that trend. If unemployment were to fall any further, we could see some heightened inflation.
Real GDP is anticipated to grow by 2.2% in 2017 and 2.3% in 2018. Growth has been stifled in recent years due to an aging workforce, slow population growth, and slow productivity. This is however still higher than the current growth rate (about 1.5%).
The inflation rate is expected to be higher than last month's rate, as fiscal stimulus under Trump is expected. Forecasted at 2.2% in 2017 and 2.4% in 2018, this could be the highest rate of sustained inflation above 2% since '07-'09. The possibility of a trade war, trade treaty expiration, and increased tariffs will also increase the price of goods driving inflation upward.
The interest rate on 10-Year Treasury Bonds is expected to rise to 3% in 2018. Borrowing will become more expensive for both consumers and the U.S. Government. Mortgages, for example, would become more expensive while payouts to investors seeking higher yields would become more favorable.
Having made an astounding comeback since the recession, The housing market has seen prices settle at a steady 5.5% increase in price. That is forecasted to hit 4.3% in 2017. Higher mortgage rates discussed above could slow that growth, as builders are anticipated to build about 1.3 million houses in 2017.
The big question... What are the odds of a recession under Trump? In the next 12 months, "forecasters believe the odds of a recession are somewhat lower" than this past summer. The odds are predicted to be 19%. The past 7 years of growth is a long time for the U.S. to not face a recession, and should there be no recession in the next 4 years, "it would be the longest stretch in U.S. history without recession". This is considered to be unlikely by most economists as the economy regularly faces cycles, as it is the nature of the beast. It will be interesting to see whether or not Trump's legacy is tainted but an inevitable crash, or if he can deliver on the grandiose promises he made during his campaign.
http://blogs.wsj.com/economics/2016/11/14/what-economists-expect-from-a-donald-trump-economy/
Based on the analytics of economists the trend of the economy seems to be on a healthy track. And it makes sense, we are approaching our steady state.
ReplyDeleteKesh makes a great point. If odds are predicted to be 19% for a recession under Trump, that is still incredibly unsettling. The unpredictability of Trump and his decision making process is something to be noted in analyzing the opportunity for staggering economic decline.
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