The US economy has entered a positive phase of the moderate growth cycle. A global upswing is supporting exports, and private investment has already picked up. Deregulation efforts are gaining steam and should support growth in 2018 – more so than modest tax cuts.
Households have been the main driver of growth in recent years and conditions remain favorable. However, I have penciled in a small decline in consumption growth, reflecting more moderate real income growth. Thus, I still do not expect a major pickup in wage gains despite the tighter labor market.
The missing link compared to pre-recession is the continued moderate outlook for housing construction – and tight fiscal policy. I expect GDP growth to reach 2.2% this year and 2.7% in 2018 with core CPI inflation moving towards 2%.