GDP Outlook Strengthens Slightly; U.S Fiscal Policy and Fed Action Key Factors SIFMA Roundtable of Economists Unveil Year End 2017 Economic Outlook

Washington, D.C., December 7, 2017 – SIFMA’s Economic Advisory Roundtable forecasted that the U.S. economy will grow 2.3 percent in 2017, strengthening to 2.5 percent in 2018.

“The current outlook for the close of 2017 and into 2018 is stronger than the Roundtable’s mid-year predictions,” said Brett Ryan, Senior U.S. Economist, Deutsche Bank Securities and chairman of SIFMA’s Economic Advisory Roundtable. “Roundtable members are keeping a close eye on fiscal policy as well as monetary policy, which is generally expected to remain on a path of gradual tightening.”

The Economy:

The median end-year forecast calls for 2017 gross domestic product (GDP) to grow by 2.3 percent on a year-over-year basis and by 2.6 percent and on a fourth-quarter-to-fourth-quarter basis, stronger than the 2.1 percent predicted on both a year-over-year and fourth-quarter-to-fourth-quarter basis in the 2017 mid-year survey. For 2018, the end-year forecast calls for GDP to grow by 2.5 percent on a year-over-year basis and by 2.3 percent on a fourth-quarter-to-fourth-quarter basis, compared with 2.3 percent and 2.1 percent in the mid-year survey.

Employment is expected to continue improving, and on a stronger basis than expected in the mid-year survey. Survey respondents predict the unemployment rate to average 4.4 percent in 2017 (unchanged from the mid-year survey), falling to 4.0 percent in 2018 (compared to 4.3 percent in the mid-year survey).

The forecast for 2017 “headline” inflation, measured by the personal consumption expenditures (PCE) chain price index, weakened slightly to 1.7 percent in the end-year survey from the mid-year 2017 forecast of 1.8 percent. For 2018, the PCE chain price index was forecast to be 1.8 percent, unchanged from expectations in mid-year.

Monetary Policy:

Respondents were unanimous in their expectation that the Federal Open Market Committee (FOMC) will raise the Federal Reserve’s target rate range by 25 basis points at the December 12-13, 2017 meeting.

Respondents were divided on the number of rate hikes they expect in 2018: 41 percent of respondents expect three rate hikes in 2018, 38 percent of respondents expect two, 17 percent expect four rate hikes and the remainder, only one rate hike.

Survey respondents considered labor market conditions to be the most important factor in the FOMC’s decision to raise rates, followed by indicators of inflation pressure and inflation expectations.

Interest Rates:

When the survey was completed on December 1, 2017, the 10-year U.S. Treasury yield was 2.37 percent. The median survey forecasts for 10-year Treasury rates were: 2.45 percent for December 2017, 2.55 percent for March 2018, 2.66 percent for June 2018, 2.80 percent for September 2018 and 2.80 percent for December 2018.

Inflation and inflationary expectations was the dominant factor cited impacting Treasury yields in the first half of 2018, followed U.S. economic conditions and FOMC interest rate policy.

Risks to Growth: Fiscal Stimulus, Tax Reform and Inflation on the Upside; Geopolitical Unrest, Global Slowdown and Market Corrections on the Downside U.S. Fiscal Policy:
U.S. fiscal policy was considered the most important factor impacting U.S. economic growth, closely followed by Federal Reserve actions.

Upside risks most often cited include tax reform, fiscal stimulus and inflation. On the downside, global slowdown, geopolitical shocks and a market correction impacting confidence were the leading causes for concern.

Policy Outlook

Respondents were divided on the impact that the uncertainty regarding major government initiatives would have on GDP in 2018: most respondents (79 percent) were evenly split between expecting no impact or a positive impact to GDP growth.

Respondents were asked to rank several potential policy changes aired by the new Administration in terms of how likely there are to be accomplished in 2018. Half of respondents expect immigration limits to have the greatest chance, followed by reduced regulation and repeal/replace of the ACA.

Most respondents expected reduced regulation would have a positive impact on GDP.

Tax Reform

When asked about tax reform, most respondents (86 percent) expected tax reform to be enacted. When asked which aspect of tax reform would have the most positive impact on U.S. economic growth, reform of corporate rates was the most oft-cited aspect, followed by international tax reform. A majority of respondents expect the tax reform package to increase the long-term potential growth rate of the U.S. economy.

The full report is available at the following link:


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