The Economic Advisory Committee of the American Bankers Association forecasts GDP growth of 2.1 percent this year and 2.3 percent in 2018, up from 2.0 percent last year, leading to more jobs and higher wages.
The committee, made up of 17 chief economists from major North American banks, said the GDP could move even higher this year and next depending on the size and timing of any economic stimulus.
“The economy has been growing for seven years and should continue to grow moderately over the next two years,” said Christopher Probyn, chairman of the group and managing director and chief economist of State Street Global Advisors.
The ABA’s Economic Committee anticipates job growth to be in line with 2016 with a projected 1.9 million more jobs added in 2017 and 1.8 million more in 2018. It sees the unemployment rate holding at 4.6 percent this year and dropping to 4.5 percent in 2018. Hourly wages are expected to rise 2.7 percent, the highest leap in eight years due to the tighter labor market.
Housing starts are forecast to rise to 1.3 million in 2018 from 1.2 million in 2017 despite higher mortgage rates.
“All of the major sectors – from housing to business investment to consumer spending – are working together to support the growth of jobs and the economy,” Probyn said. “Consumers feel more confident because the labor market is improving, wages are rising, home values are appreciating and investment returns are increasing. It makes them more comfortable buying cars, going on vacations and making other big-ticket purchases.”
Anticipated tax cuts and increased infrastructure spending under the Trump administration could push economic growth even higher than anticipated.
Further, the committee expects the Federal Reserve to raise interest rates twice in 2017 to the 1.00-1.25 percent range by year-end and three times in 2018 to the 1.75-2.00 percent range.
“The combination of fiscal stimulus, faster growth and accelerating inflation could lead the Fed to move more aggressively than anticipated,” Probyn said.
Finally, the committee foresees inflation rising 2.2 percent this year, up from 1.5 percent.