GDP, Inflation and Interest Rates Forecast to Rise Under Trump Presidency
by Josh Zumbrun | Nov 15, 2016
Economists cite ‘trade wars’ as biggest risk to economy as uncertainty over outlook remains high
The presidency of Donald Trump is poised to usher in a new era for the U.S. economy that forecasters say could boost economic growth, bring higher interest rates and inflation, and a new set of potential risks including international trade wars.
The cautious optimism revealed in The Wall Street Journal’s latest monthly survey of economists owes to the belief that the Republican’s proposals to reduce taxes and invest in infrastructure will amount to a substantial fiscal stimulus.
The change of administration could “knock the U.S. economy out of its low-altitude, low-growth orbit,” said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. The question is, he said, “Will it put the economy in a higher growth orbit, or will it knock us down into the atmosphere and a fiery re-entry?”
On average, economists marked up their growth forecasts. The economy could expand 2.2% in 2017 and 2.3% in 2018, as a fiscal stimulus kicks into gear, up from about 1.5% over the past 12 months. Inflation is seen at 2.2% next year and 2.4% in 2018. If correct, it would be the first stretch of sustained inflation above 2% since before the recession of 2007 to 2009.
The forecasts were collected from 57 academic, business and financial economists from Nov. 9 to Nov. 11. Their average forecasts for growth, inflation and interest rates in both 2017 and 2018 all rose, at least slightly, from a survey conducted before the election in October.
Mr. Trump’s administration is only beginning to take shape, and many economists cautioned their estimates are tentative. “Anyone who tells you they absolutely know what will happen under a Trump presidency is probably lying,” said Megan Greene, chief economist at Manulife Asset Management.
The priorities of the incoming administration and congressional Republicans are being hashed out. Ms. Greene notes the policies Mr. Trump could enact the most quickly, such as restricting trade or immigration, could do swift harm to the economy. The source of the current optimism is tax cuts and infrastructure plans, but these would take longer to implement because they would need to go through Congress.
Read the rest of Josh Zumbrun’s article at the Wall Street Journal.
[or enter the title in your favorite search engine for complete article – ed.]
