NEW YORK: US economic growth will not achieve the new administration’s 3% goal this year or next, even if some fiscal stimulus and changes to tax laws are implemented, according to economists in a Reuters poll.
Those expectations surfaced amid doubts about President Donald Trump’s ability to push through such legislation after the defeat of the administration’s healthcare bill.
Having rallied to record levels on prospects of fiscal stimulus, the US stock market and dollar have lost steam, while Treasury yields recently sank to a five-month low.
“Expectations around the size of the fiscal stimulus we would get in the United States were overdone coming into the year,” said Ethan Harris, head of global economics at Bank of America Merrill Lynch.
“The markets are now converging to a more skeptical view on that.” The poll of more than 100 economists during April 7-19 showed economic growth averaging 2.3% this year and 2.4% in 2018.
Suggesting confidence in the economy, however, economists raised their annualised forecasts for the second quarter to 2.7% from 2.4% in March’s poll. Third and fourth quarter medians held at 2.4%.
If recent history is anything to go by, though, economists could lower this outlook. They have generally been sanguine at the start of the year, only to become less optimistic later.
The forecasts in the latest poll reflect expectations for some tax changes and stimulus, according to almost three-quarters of the 40 economists who answered an additional question.
But the Federal Reserve has made clear it has not factored any fiscal impetus into its outlook. — Reuters