December 12, 2016
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SIFMA Roundtable of Economists Unveils
End-Year 2016 Economic Outlook
December 12, 2016 – SIFMA's Economic
Advisory Roundtable forecasted that the U.S. economy will grow 1.6 percent in
2016, strengthening to 2.2 percent in 2017. The current outlook for 2016 and
2017 gross domestic product (GDP) is slightly weaker than the Roundtable's
mid-year prediction, although the range of the 2017 forecast is wider and
skewed more to the upside.
"While there are
many fiscal and trade policies to be determined in the Trump Administration,
the SIFMA panel expect a break in the fiscal log jam toward stimulus and the release
of business 'animal spirits' from their regulatory cages will accelerate
economic growth in 2017 with potential skewed to the upside," said Stuart
Hoffmann, SVP and Chief Economist, PNC Financial Services Group and chairman of
SIFMA's Economic Advisory Roundtable.
end-year forecast called for 2016 GDP to grow by 1.6 percent on a
year-over-year basis and for 2017, by 2.2 percent on a year-over-year basis.
Employment is expected to continue to improve slightly, with the unemployment
rate expected to fall from an average of 4.9 percent in 2016 to 4.7 percent in
2017. Employers are expected to add 2.2 million workers to their payrolls
in 2016, falling slightly to 1.9 million in 2017. Estimates for business capital investment for
full-year 2016 remained the same as mid-year, while the outlook weakened
considerably for 2017. The outlook for state and local government spending also
weakened to 0.9 percent in 2016 and 1.0 percent growth estimated in 2017.
The forecast for
"headline" inflation, measured by the personal consumption expenditures (PCE)
chain price index, was 1.1 percent for 2016, rising to 1.9 percent in 2017.
All but one respondent expect the Federal Open Market Committee to hike
the Federal Reserve's target rate range at the December 13-14, 2016 meeting.
Respondents' rate hike expectations were not impacted by the results of the
presidential election, although a handful admitted they did wait to see how the
markets reacted. For 2017, 75 percent of respondents expect two additional rate
A couple of
respondents noted that the composition of the Board of Governors would be
influential: "[President] Trump will pick as many as 5 Fed governors by the end
Risks to Growth: Fiscal Stimulus, Deregulation and Tax
Reform on the Upside; Trade Protectionism and Restrictive Immigration on the
confidence was considered the most important factor impacting U.S. economic
growth, followed by U.S. fiscal policy and private credit market conditions.
Upside risks include fiscal stimulus, deregulation and tax reform. On the
downside, protectionist trade policy was a leading cause for concern, as were
uncertainty over fiscal and other policies, such as restrictive immigration.
While 94 percent
of respondents agreed that the election of Donald Trump increased fiscal policy
uncertainty, nearly two-thirds of respondents estimated an upward impact of up
to 25 bps, 19 percent estimated an upward impact of greater than 25 bps and 13
percent estimated a downward impact of up to 25 bps.
likely policies to be enacted include corporate and personal tax policies,
followed by infrastructure spending and restrictions on immigration.
Respondents also considered the repeal of the Affordable Care Act, regulatory
reform, repatriation, tariffs, and energy policy changes to be likely.
policy, corporate tax policy and infrastructure policy would be expected to
positively impact GDP growth, while trade policies and immigration policy were
expected to negatively impact GDP growth.
More than half of
respondents (60 percent) expected the improved financial regulatory policy
would raise GDP growth by up to 50 bps in 2017, if enacted, while a third of
respondents expected no impact and the balance expected a negative impact of up
to 50 bps.
noted, "Regulation costs over $1 trillion a year. Eliminating and simplifying
some of it would be the equivalent of a massive tax cut."
Panelists placed a
12.5 percent chance on West Texas Intermediate (WTI) crude oil prices dropping
to below $40 by end of the first half of 2017, a 42 percent chance of prices
between $41 and $50 a barrel, a 37 percent chance of prices between $51 and
$60, and the balance for prices rising to $61 or higher. Respondents estimated
that the most likely scenario – oil prices remaining in the $41 and $50 per
barrel range – would have no impact on economic growth, similar to the mid-year
estimated that WTI would settle at an equilibrium price of $65.00 per barrel
three years from now, assuming continued moderate global growth.
The full report
is available at the following link: www.sifma.org/eoutlook20162h/
Listen to the Podcast:
SIFMA Podcast: SIFMA’s Economic Advisory Roundtable Forecasts 2.2% GDP in 2017
SIFMA is the
voice of the U.S. securities industry. We represent the broker-dealers, banks
and asset managers whose nearly 1 million employees provide access to the
capital markets, raising over $2.5 trillion for businesses and municipalities
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than $67 trillion in assets for individual and institutional clients including
mutual funds and retirement plans. SIFMA, with offices in New York and
Washington, D.C., is the U.S. regional member of the Global Financial Markets
Association (GFMA). For more information, visit http://www.sifma.org.