U.S. Economy is Looking Up, as Improvement Continues Through 2017
Having a basic understanding of current economic conditions can help you make smarter, more strategic decisions about your business. You can benchmark your performance against national markets and trends. You can better forecast your book of business. You can even boost your business agility by monitoring shifts in your industry, or the broader economy.
For these reasons and more, Equifax is proud to offer its quarterly U.S. Economic and Credit Trends U.S. Economic and Credit Trends Outlook. We hope this regular update can help you optimize performance, growth and profitability across all areas of your business by giving you a fresh, current snapshot of the economy and key consumer trends.
Specifically, this update is characterized by two factors: improvement and uncertainty. Generally, 2017 is looking up, steadily improving compared to 2016. But, there are big question marks surrounding the regulatory policies of the new U.S. presidential administration. The same goes for last year’s Brexit vote and ensuing fallout, which is fueling sparks of nationalism within Europe. Until the nation and the world receives solid direction on these issues, many businesses and consumers are in “wait and see” mode, which is creating a drag on the American economy and ultimately keeping it from reaching its full potential.
With that said, let’s get right to it.
Current consensus forecasts predict improving U.S. economic conditions in 2017 over 2016, though not at the higher levels that some economists had hoped. Many were excited about stronger growth in 2017 that could finally close the book on the Great Recession. However, expectations have been downgraded as first quarter numbers have started materializing, and amid widespread uncertainty about new regulatory policies following the recent U.S. presidential election and change in administration.
Productivity gains have also increased, but slowed dramatically. The January 2017 consensus for real GDP in 2017 is 2.3 percent versus 1.8 percent in 2016, with a long term potential of up to 2.5 percent.
Likewise, labor markets are improving, as hiring continues at a fairly brisk pace. Looking ahead, however, hiring is expected to slow as the country is at or near its natural rate of unemployment. Eventually, the pace of hiring will resemble something more like general population growth. Notably, U.S. employment is finally expected to break free from the shackles of the Great Recession and its related effects.
Wages are also improving, slightly higher than inflation. Yet, there remains room to grow as the country hasn’t reached full employment. When this occurs, employers are not only working hard to attract talent, they’re also forced to compete for talent, which drives up wages.
Interest rates are also expected to gradually rise throughout 2017. More specifically, a 12 basis point increase is forecasted for 10-year Constant Maturity Treasury rates (CMT) for each of the next four to eight quarters. This is mainly due to the improving economy. However, volatility will remain constant as long as there’s tension and uncertainty around national and global regulatory policies. In other words, if there are high or low rate bounces, don’t expect them to last long.
While business economists expect a rate increase in 2017, their federal funds rate forecast is more conservative than the Federal Open Market Committee (FOMC).
Through 2018, 10-year CMT rates are expected to increase to a maximum of approximately 4 percent and a minimum of roughly 2.7 percent. Similarly, quarterly average 30-year fixed mortgage rates are also forecasted to top out at a maximum of 5.8 percent and a minimum of 4.4 percent through 2018. The spread between both CMT and fixed mortgage rates is expected to remain fairly constant during that time.
To view the complete U.S. Economic and Consumer Trends Outlook presentation led by Amy Crews Cutts, senior vice president and chief economist at Equifax, click here.
Helping you grow and protect your business—it’s our goal at Equifax. For more information about the many ways we can help, please contact us.
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