Cushman & Wakefield On Economic Outlook For 2017

Americans are optimistic about President-elect Donald Trump’s future impact on the economy, and experts agree.

All signs point to a mixed economic outlook in 2017 as US gross domestic product, inflation and interest rates are all poised to increase this year. Experts project the economy will be buoyed by Trump’s plans for corporate tax cuts, further deregulation and increased fiscal stimulus by cutting through the bureaucratic red tape in Washington to boost jobs and wages. This is according to Cushman & Wakefield’s recent US Macro Outlook report, in which the firm said economic and commercial real estate outlooks have been revised upward pending Trump’s move into the White House.

GDP Rebound

Prior to Trump’s surprising victory the economy was on the rebound after one of the longest and most sluggish recovery cycles in its history. GDP expanded at a 3.5% annual rate in Q3, up from the 2.9% initially reported in October — the fastest pace for economic growth since Q2 2014.

“Even before the election, the US fundamentals were showing signs of heating up … Now when you layer in the expected tax cuts and spending multipliers from the new administration, it creates an even stronger economic backdrop for the property markets heading into 2017,” Cushman & Wakefield global chief economist Kevin Thorpe said.

The firm anticipates GDP to grow by 2.3% this year, hitting 3% in 2018 and creating more than 3 million new jobs within the next two years. 

Labor Market Gains

Job gains, unemployment, consumer confidence and spending ended 2016 on a good note as unemployment dropped in November to 4.6%, its lowest level since May 2007. Labor market undercurrents remained strong in the midst of volatility in financial markets last year. As the market approached full employment last year, payroll gains dropped slightly to an average 189,000 job gains per month as of November, compared to 262,000 per month during its peak in February 2015.

C&W reports job gains are still healthy, which translates positively for commercial real estate fundamentals. 

Increased Inflation, Interest Rates

Some of Trump’s fiscal stimulus will be tempered by monetary policy. Just last month the Federal Reserve raised interest rates by 0.25% after a year without any short-term movement. In anticipation of the move, the 10-year Treasury had already jumped anywhere between 60 and 80 basis points, Reis Inc chief economist Victor Calanog told Bisnow. C&W predicts 10-year bond yields will jump from 1.9% in 2016 to average 2.6% this year, climbing to 3.1% in 2018.