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Under Donald Trump’s leadership, US gross domestic product (GDP) is widely expected to accelerate. However, I expect only a modest upswing to 2.4% in 2017 and 2.6% in 2018, not a growth rate of 3.5% to 4.0%, as promised in his election campaign.
Moreover, most of the incremental growth in 2017 will come not from fiscal stimulus, tax cuts or infrastructure spending, but from the strengthening business cycle upswing which Mr. Trump has had the good fortune to inherit.
US consumer price index (CPI) inflation may rise moderately, but will not be much affected by the fiscal deficit. Unless money and credit growth accelerate, inflation will remain broadly unchanged at around 2%. In October, core personal consumption expenditure (PCE) was 1.7%; core CPI was 2.2% year-on-year.
Following the 0.25% hike in the US federal funds range in December, I expect the US Federal Reserve (Fed) will raise interest rates two or three times in the year ahead, taking the target range to 1.00% to 1.25% by year end 2017.
In the Euro-area, the outlook remains subdued in the short term, and still far from robust in the long term. Recently extended to December 2017, at a reduced rate of €60 billion per month from April 2017, the European Central Bank’s (ECB) flawed quantitative easing (QE) strategy continues to fail to gain traction.
Source : Invesco Real Estate
