Skip to Content
Investing Specialists

What's Holding Back GDP Growth in 2017?

Slower consumption growth will weigh this year, while housing will likely make a smaller contribution versus last year.

The final scheduled revision to fourth-quarter and full-year 2016 results prompted us to take a deeper dive into the key drivers of GDP growth in the longer term and in the short run.

In the short run, slower consumption growth is likely to hold back GDP growth in 2017 despite the potential for better spending by both the government and business sectors. We are still sticking with our 1.75%-2.0% GDP growth forecast for 2017, slightly better than the 1.6% rate registered in 2016. Higher inflation rates and limited income growth will pressure consumers, especially those who are fixed-income dependent. As discussed after the GDP section below, consumption data is already off to an ominous start in 2017, with two back-to-back months of inflation-adjusted consumption declines.