2018 Midyear Global Outlook:
U.S. economy sets the pace


The health of the U.S. economy remains a pocket of strength for global growth despite a slow start to the year and the looming presence of higher market volatility. The economy delivered a weaker than expected first quarter, as measured by gross domestic product (GDP) growth, due in part to a dip in personal consumption. However, we believe it is poised to recover and show strength for the remainder of the year. The U.S. Tax and Jobs Act signed into law by President Donald Trump in late 2017 and a $1.3 trillion stimulus bill passed in March of this year are likely to contribute to that strength.

We maintain our initial U.S. GDP growth forecast of 2.9% for 2018.

Overall business optimism remains strong despite concern over the Trump administration’s position on several issues, most notably the direction of U.S. trade policy. According to the Small Business Optimism Index, small business owners currently are more optimistic than any other time in the index’s 45 year history.

Many small business owners reported record profits, and indicated they plan to use this profit growth to make capital investments and add headcount.1 (Chart 1)

Chart 1: Small business optimism soars

* Source: “Small Business Economic Trends,” National Federation of Independent Business, May 2018. Index reading is seasonally adjusted, based on baseline of 1986=100, and shows rising and/ or falling rates of optimism.

Large company leaders also are confident, albeit slightly less than their small business counterparts. After reaching a record high in the first quarter of 2018, the CEO Economic Outlook Index — a composite of corporate executives’ sales projections, capital spending forecasts and hiring plans over the next six months — had a modest decline in second quarter, with trade uncertainty a key reason.2 (Chart 2)

Chart 2: Large companies confidence slips over trade

Source: “CEO Economic Outlook Survey 2Q 2018.” Business Roundtable/Haver Analytics, 06/05/2018. Data from CEO Economic Outlook Survey Diffusion Index; readings of 50 and above indicate optimism about business expansion.

We believe U.S. GDP growth remains on pace with our initial 2018 forecast of 2.9%. While inflation has picked up slightly, it is still in line with the U.S. Federal Reserve’s (Fed) target of a 2% annual rate.

A strong labor market also is contributing to the upbeat U.S. economic picture. The unemployment rate fell to 3.8% in May, the lowest level in 18 years. While improving, wage gains this year have been modest given the low level of unemployment. We believe wage growth will continue to improve in the second half of 2018.

2018 Midyear Global Outlook - Continue Reading
Section 1 — U.S. economy sets the pace
Section 2 — Global economy hums along
Section 3 — U.S. dollar rally looks more durable
Section 4 — What are the risks?
Section 5 — Key sectors to watch

1Source: “Small Business Economic Trends,” National Federation of Independent Business, May 2018.

2Source: “CEO Economic Outlook Survey 2Q 2018,” Business Roundtable/Haver Analytics, April 2018.

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