US growth likely to be ‘lower than expected in 2017’ US growth likely to be ‘lower than expected in 2017’

Mike Jakeman, analyst at the Economist Intelligence Unit {EIU} has asserted this morning that the US economy is likely to grow by less than forecast this year.

Financial market analysis and opinion for the UK investment industry

Financial market analysis and opinion for the UK investment industry

He commented that, ‘The Economist Intelligence Unit has maintained its forecast for global growth in 2017 at 2.6 per cent. However, within this aggregate, we have reduced our forecast for US growth to 2.2 per cent, from 2.3 per cent previously, owing to a soft start to the year.’

The analyst reiterated his previously stated view that the election of Donald Trump will not make a material difference to US growth this year.

Jakeman commented that, ‘  Our already sceptical view of the likely policy achievements of the US administration has hardened in the past month, following the failure of the American Health Care Act to reach even a congressional vote. Ambitious reforms on tax and trade are likely to be scaled back, while any increase in infrastructure spending will face tough opposition in Congress.’

The analyst added that, ‘Despite the revision to the US forecast, there is evidence that the global economy is undergoing a cyclical improvement. Accordingly, we have nudged up our forecast for global merchandise trade growth, to 2.9 per cent in 2017, from 2.7 per cent previously. Goods exports from Asia have been healthy in recent months.’

Read more: The best way to invest in China in 2017

The Chinese economy has performed stoutly, and better than many analysts had expected in recent times, with the expected impact of US higher interest rates, and the consequent rise in the value of the dollar, not having materialised.

A rising dollar might have been expected to have a negative impact on China, as it pushes up the borrowing costs of corporates who are generally unable to borrow in any currency other than the Greenback.

But policy makers in the country have been resolute in selling a trillion dollars worth of US government bonds from their own reserves, protecting the value of the local currency.

This has staved off the expected negative impact of the dollar’s rise on China, whilst the economy, and others in Asia, have gained from the improved global economic conditions globally to grow their exports.

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