Economists: Probability that U.S. economy will grow 3% this year has fallen
The probability that the U.S. economy will grow 3 percent this year has fallen over the last month as weak data and political concerns have dented confidence, according to a slim majority of economists in a Reuters poll.
That finding comes as hopes for tax cuts and other pro-growth policies promised by President Donald Trump have faded amid reports Trump tried to interfere with an investigation into ties between his first national security adviser and Russia. Those reports prompted the biggest sell-off in U.S. equities since early September.
With Washington policymakers distracted by Trump’s political problems, the risks of a longer timeline to see the realization of tax reforms and other pro-growth fiscal policies have increased.
A rapid pace of expansion is essential for Trump’s broader economic agenda but the U.S. economy grew at its slowest pace in three years in the first quarter, just 0.7 percent on an annualized basis.
While the latest poll of 100 economists, taken May 12-18, showed growth will rebound in the second quarter to 3.2 percent, forecasts suggest that will be the best rate through to the end of next year, with annual averages for this year and next well below the 3 percent target.
“The weak first quarter growth estimate makes it impossible for the U.S. to reach the 3 percent threshold — it would require three straight quarters of over 5 percent annualized growth,” said Rebecca Mitchell, economist at IHS Markit.
Fifty-three percent of respondents who answered an extra question said the chance of achieving 3 percent growth had fallen over the past month; 37 percent said it had not changed and just 10 percent said it had risen. (For a graphic: reut.rs/2quCpvM)
Breaking it down further, predictions for average growth in the first two quarters taken together or the first half of the year, are slightly lower than what was expected last month.
The consensus is for growth in a range of 2.4 to 2.5 percent per quarter from July this year through the end of 2018.