Vol 15 (2018) - Issue 6

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The Growth Outlook

Synopsis
Once the pro-cyclical effects of US fiscal policy will have run their course and monetary conditions will have tightened further, the US and thereby the global economy will be increasingly vulnerable to policy mistakes. The biggest risk is US trade policy.

Yesterday’s tailwinds lead to tomorrow’s headwinds

US growth is robust, with Q2:18 GDP advancing at an annual clip of 4.2%, following a 2.2% rise in Q1:18. In the tenth year of the business cycle, the economy is likely to reach a strong 3% growth rate in the second half of the year, leaving growth for the full year also at around 3%. This performance follows average growth of 2.2% between 2010 and 2017. How sustainable is this stronger trend? In an attempt to answer this question, we examine the main drivers of growth, the tailwinds and headwinds of the cycle against deeper structural changes and major risks.