In February 2017 AciesGroup published a 2017 Outlook Report, which compared the economic forecasts of leading economists. The following is a summary look at what was predicted at the beginning of the year compared to what economists see for the 2nd half of 2017.
Economists across the globe made their 2017 economic forecasts largely based on assumptions about planned Trump Administration policies, the fallout from Great Britain’s upcoming exit from the EU, and the pending national elections in the Netherlands, France, and Germany. Unfortunately, as clarity has come to many of these issues, a new topic has risen to keep uncertainty in the markets.
As more confidence about the economic recovery has evolved in the United States and Europe, what the Bank of Japan, Europe, and the U.S. will do with quantitative easing has become the focus rather than what policies are coming out of government. As the U.S. Central Bank prepares to reduce its balance sheet and the EU Central Bank slows or suspends their monthly $60 billion quantitative easing measures economists continue to debate what effect these measures will have on the world economies.
The Morgan Stanley Research Team has increased their outlook for the remainder of 2017 based on results in the United States and Europe. The team has increased their outlook for 2017 to 3.6% from 3.4%. The team raises their 2018 prediction to 3.7%.
Although Wells Fargo’s forecast of 3.3% for Global GDP in 2017 has remained unchanged, their outlook for 2018 has increased to 3.4% from 3.2%.
Wells Fargo still expects U.S. GDP growth to reach 2.2%, which was their original forecast back in December 2016. However, their 2018 forecast has increased to 2.5%, up from 2.2%. The Wells Fargo economists expect the Fed to raise interest rates again in 2017, and is looking for the Fed to outline its QE reversing plan in September.
Morgan Stanley believes the Federal Reserve will raise interest rates five times between July 2017 and the end of the year 2018. In conjunction with this action, Morgan Stanley is anticipating a plan from the Fed to reduce its balance sheet.
Vanguard estimates one additional rate hike by the Fed in 2017 and expects the Fed to begin reducing its balance sheet in the second half of this year. Vanguard also expects a reduction of bond buying by the EU’s central bank, but probably not until early 2018.
Revised Economist Expectations
Morgan Stanley: Original: Predicted that the Fed would increase rates five times before the end of 2018. Revised: Subsequent to the two increases made during the first half of 2017, MS now believes another five raises will be made by the end of 2018, for a total of seven in that two-year time span.
Wells Fargo: U.S. GDP forecast remains at 2.2%, but 2018 forecast increases to 2.5% versus 2.2% as originally forecasted.
Goldman Sachs: Original: U.S. growth to average 2.25% in 2017. Revised: Continued growth at 2- to 2.5% in 2017.
Morgan Stanley: 2017 global growth rate of 3.4% has been increased to 3.6%. 2018 increased to 3.7%.
Wells Fargo: Keeps 2017 forecast at 3.3%, but increases 2018 forecast from 3.2% up to 3.4%.
JP Morgan Chase: Original: Fed will act slowly due to limited growth overseas. Revised: A 0.25% increase at each press conference through 2018.