BBVA Compass Economists Downsize Outlook for U.S. GDP Growth to 2.1%

BBVA Compass economists, citing the weak first quarter and lack of progress on fiscal policy, have revised downward their baseline forecasts for U.S. GDP growth to 2.1 percent for 2017 and 2.2 percent in 2018.

The economists say the lack of progress on policies that could boost growth, such as tax reform and infrastructure spending, is partly to blame. In the team’s Third Quarter Economic Outlook, BBVA Compass Chief Economist Nathaniel Karp also explores some of the forces behind the structural, longer-lasting changes taking place in the U.S. economy that are contributing to low productivity and weak growth and challenging economists and policymakers alike.

“Although there is still time for the GOP to deliver comprehensive tax and healthcare reform, the lack of progress to date and inability to pass even partisan reforms suggests that the upside to growth is lower than it was heading into the year,” BBVA Compass Chief Economist Nathaniel Karp writes in the new report. “As a result, market, consumer and business expectations, which have been historically high, will have to adjust to an environment characterized by moderate growth, tighter financial conditions and unresponsive policymakers.”

Among the other conclusions in the report:

• Trump’s economic agenda: The economists examine two pillars of Trump’s economic agenda – infrastructure investments and protectionist trade policies. They find that the implementation of the president’s agenda would have mixed effects on the economy.
• Global growth: BBVA Research is forecasting a robust 3.3 percent global growth rate for 2017 and slightly higher than that, 3.4 percent, for 2018. Growth rates in both China and Europe are ticking up.
• Oil prices: Karp and team expect Brent crude oil prices to average $51.70 a barrel in 2017. That estimate is $6 less than their forecast at the outset of the year, and reflects growing uncertainty over OPEC’s strategy to stabilize the market.

To read the full report, go to bbva.info/2hnQetC.

Led by Nathaniel Karp, the bank’s research team analyzes the U.S. economy and Federal Reserve monetary policy. For its analyses, the economists create models and forecasts for growth, inflation, monetary policy and industries. The Economic Research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates. Follow their work on Twitter @BBVAResearchUSAand @BBVACompassNews.

To learn more about BBVA Compass, visit: www.bbvacompass.com