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Significant Changes in the Quarterly Consensus - December 5, 2016

Changes in G-7 Quarterly Forecasts for GDP contrasts the December 2016 consensus projections in blue (pages 3, 28 and 29) with those from June 2016 and December 2015. In general, the outlook for all countries (except Japan) has deteriorated since our June survey. GDP growth in the US has been below-par in 2016 but could pick up pace next year supported by strong personal consumption and firmer manufacturing production. Italian forecasts have tumbled amid renewed political uncertainty after the resignation of the prime minister. Heightened concerns over the fragile banking sector could yet have more far-reaching implications on the Euro bloc. Key elections next year in France and Germany add risk to near-term sentiment in these respective economies. Brexit has softened the UK outlook, although it could still be sometime before a formal EU exit is finalized.

 
Historical Data
Quarterly Forecasts from December 2016 Survey
Gross Domestic Product*
*% change over previous year
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
United States
2.2
1.9
1.6
1.3
1.6
1.9
2.2
2.4
2.2
2.2
Japan
2.1
1.2
0.3
0.9
1.0
1.3
1.1
1.2
0.9
0.9
United Kingdom
1.9
1.7
1.9
2.1
2.3
1.9
1.7
1.3
1.1
1.1
Italy
0.6
0.9
1.0
0.8
1.0
0.7
0.6
0.8
0.8
0.9

US GDP growth rose by 1.6% (y-o-y) in Q3 but in q-o-q terms, activity doubled from the Q2 pace of 0.4% to 0.8%. The economy was lifted by consumer spending, although this slowed from Q2. On the other side of the domestic-demand equation, business investment remained in contraction, and on a q-o-q basis, investment was flat as firms exercised caution ahead of November’s highly-charged election. With an incoming Republican administration, our panellists’ predict that US GDP growth will settle around 2.2% (y-o-y), and it is still unclear whether the new government will immediately embark on fiscal expansion and tax cuts as promised. (Moreover, Canadian GDP expectations are also uncertain, pending Trump’s criticism of NAFTA). This 2.2% US growth projection is relatively solid but modest when compared with around 3% exactly a decade ago. Indeed, quarterly GDP forecasts for the rest of the G-7 also indicate only modest rates of activity. As the charts on page 2 illustrate, quarterly sentiment has deteriorated compared with 6 months and one year ago, especially in the case of France, the UK and Italy. Factors including widespread loss of confidence in the political status quo are impinging on all three countries. Brexit hangs over UK estimates, its outcome an unknowable factor at this point, but with risk edging to the downside due to fears of trade isolation and lost dynamism.

 
Historical Data
Quarterly Forecasts from December 2016 Survey
Consumer Price Inflation*
*% change over previous year
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
United States
0.1
0.4
1.1
1.1
1.1
1.7
2.3
2.3
2.4
2.3
Japan
0.1
0.2
0.0
-0.3
-0.5
0.0
0.2
0.5
0.7
0.8
United Kingdom
0.0
0.1
0.3
0.3
0.8
1.2
2.0
2.5
2.7
2.8
Euro zone
0.1
0.2
0.0
-0.1
0.3
0.6
1.2
1.2
1.3
1.3

 

 

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Taken from Consensus Forecasts, December 2016.