Bullish traders who insist that US economic fundamentals remain rock-solid despite tepid growth, inflation and other signs the postelection ‘Trump bump’ in consumer confidence is already beginning to fade should take a look at the International Monetary Fund’s latest batch of quarterly forecasts for global growth.
The fund left its all-world forecasts for 2017 and 2018 unchanged from its previous quarterly update, which was released in April: It anticipates 3.5% and 3.6% growth, respectively.
However, those numbers mask a sharp decline in the fund’s forecasts for US growth, which have been lowered sharply to reflect expectations that President Donald Trump’s promised fiscal expansion package likely won’t arrive until next year, according to a report published by the IMF. In an update that shouldn’t surprise anyone who’s been following US macro data since the start of the year, the fund revised its forecasts for 2017 and 2018 down 0.2% to 2.1% and 0.4% to 2.1%. It continues to expect the US economy to expand by 1.6% in 2016.
The fund said its decision to lower US growth forecasts reflects in part the weak growth experienced during the first quarter. But what it calls the ‘major factor’ behind the revision, especially for 2018, is the assumption that ‘fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of U. S. fiscal policy changes. Market expectations of fiscal stimulus have also receded.’
This post was published at Zero Hedge on Jul 24, 2017.