SIFMA Roundtable of Economists Unveil End-Year 2018 Economic Survey: Monetary Policy Path Remains Critical, Trade a Concern

Washington, D.C., December 13, 2018 –  Today, SIFMA unveiled the results of the twice annual survey of the chief U.S. economists of many of SIFMA’s global and regional firms, forecasting that the U.S. economy will grow 2.9 percent in 2018 and by 2.6 percent in 2019, unchanged from its mid-year predictions.

“The current outlook for 2019 is steady with a forecast of 2.6 percent growth,” said Michael Feroli, Chief U.S. Economist, J.P. Morgan and chairman of SIFMA’s Economic Advisory Roundtable. “Trade policy and monetary policy were both important considerations in the forecast, with the latter generally expected to remain on a path of gradual tightening.”

The Economy:

The median end-year forecast calls for 2018 GDP to grow by 2.9 percent on a YOY basis and by 3.1 percent on a 4Q-to-4Q basis. For 2019, the end-year forecast calls for GDP to grow by 2.6 percent YOY and by 2.2 percent on a 4Q-to-4Q basis.

Employment is expected to continue improving on a slightly stronger basis than expected from mid-year prediction. Survey respondents now predict the unemployment rate will average 3.9 percent in 2018, improving to 3.5 percent in 2019. Expectations for job growth were also slightly stronger, with employers expected to add 2.4 million workers to payrolls in 2018 and to add 2.0 million in 2019. Expectations for personal consumption strengthened significantly since the mid-year survey, rising to 2.7 percent for full-year 2018 and to 2.8 percent for 2019.

The forecast for 2018 “headline” inflation, measured by the personal consumption expenditures (PCE) chain price index, fell slightly to 2.1 percent in the end-year survey from the mid-year survey. For 2019, the forecast PCE chain price index rose modestly to 2.1 percent. The projection for the core PCE chain price index, which excludes food and energy prices, was unchanged from the mid-year survey, with 1.9 percent expected for full-year 2018 and 2.0 percent for full-year 2019.

Monetary Policy:

All but one of the respondents expect the FOMC will raise its target rate range at the December 18-19, 2018 meeting to 2.25 to 2.50 percent from the current 2.00 to 2.25 percent range. For 2019, respondents continued to be divided in their predictions for rate hikes, although the most oft-cited prediction was for two rate hikes.

Survey respondents considered indicators of inflationary pressure and expectations to be the most important factor in the FOMC’s decision to raise rates in 2019, followed by labor market conditions.

Interest Rates:

Most respondents expected the Treasury yield curve to flatten in the first half of 2019. U.S. economic conditions, inflation and inflationary expectations, and FOMC policy remain the dominant factors cited impacting Treasury yields. The median forecasts for 10-year Treasury rates were 3.10 percent for December 2018, rising to 3.34 by December 2019.

Risks to Growth: Fiscal Stimulus, Private Sector Investment and Patient Fed on the Upside; Trade, Geopolitical Crisis, Monetary Tightening on the Downside:

Respondents ranked trade policy as the single variable in their U.S. economic growth forecasts for the first half of 2019 – for better or worse. Private sector investment, and to a lesser extent, consumer spending, infrastructure spending and tax reform could result in higher than expected growth.

On the downside, following the risk of higher than expected tariffs/lack of resolution of trade disagreements, respondents most frequently cited the risk of overly aggressive tightening by the Federal Reserve.

Tax Policy:

Three quarters of respondents estimate the 2017 tax reform positively impacted full year 2018 GDP growth by more than 25 bps, while one quarter estimate the impact to be in the 0 to 25 bps range. A majority of respondents believe tax reform increased the long-term potential growth rate of the economy.

United States-Mexico-Canada Agreement (USMCA)/Trade Policy:

Asked about what impact the USMCA would have on GDP growth once it is enacted, the majority saw no impact.

Most respondents agreed that tariffs have negatively impacted fourth quarter 2018 GDP by up to 25 bps. Respondents were more measured on the impact of tariffs on the PCE deflator, with respondents split between a rise of 10 bps and no change.

The full report is available at the following link:


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