Interestingly, a case can be made either way.
Because I prefer to end my blogs on a positive note, let’s first look at what might detract from or slow economic growth in 2017.
1. The strengthening US dollar. Since the November 2016 election, the dollar is up 4%. It is predicted to increase by another 5% this year. (Source: Kiplinger Letter 1-13-17)
Anyone want to go to Europe?
2. Gradually rising interest rates. This could impact sensitive sectors such as housing and auto sales.
3. The uncertainty of trade wars. If the president makes good on campaign promises, countries could retaliate by buying less U.S. goods. Punitive tariffs are also a possibility.
Now let’s consider the positives.
1. It seems that people are ready to spend money. The recent increase in the U.S. stock market adds to a sense of success and abundance. Increased spending often follows. Also remember that consumer spending accounts for some 70% of the U.S. gross domestic product (GDP). (Source: Kiplinger Letter 1-13-17.)
2. Wages are expected to grow at a 3% rate in 2017 compared to 2.6% in 2016. Employers are also expected to keep hiring. If inflation comes in at the predicted 2.4%, this will mean workers experience a real increase in spending power. (Source: Kiplinger Letter 1-13-17.)
3. While student debt remains an obstacle for Millennials, household debt is at its lowest point in 50 years. (Source: Kiplinger Letter 1-13-17)
4. The same Kiplinger Letter also suggests that single family housing starts will increase by 10% in 2017.
To summarize, the positives outweigh the negatives for economic growth in 2017. However, we also face many unknowns, starting with the content of the next reactive presidential tweet!
2017 should unfold to hold many surprises. Hopefully more will be positive than otherwise.
Barbara A. Culver
CFP®, ChFC®, CLU, AEP®