i3 - January/February 2017 - 94

Business

By Shawn G. DuBravac, PhD

T H E EC O N O M I ST

set available to the Federal Reserve in
responding to negative economic shocks.
Finally, the dollar should continue to
edge higher. The dollar has been moving
higher since 2014, driven by net capital
inflows as a result of widening interest
differentials. Higher interest rates will
exert upward pressure on the dollar.
More, widening global uncertainties
have also driven capital to perceived safe
havens like the U.S.

What I Expect For 2017

 W

e flip the page on
another year -
closing out 2016
and opening 2017.
Here are a few things I except
for the coming 12 months.
Near-term Growth Led
by Consumers and Capital
Investment
After growing 1.9 percent in 2015, the
economy expanded a paltry 1.7 percent
in 2016. I expect a modest up-tick and
improvemw 2017. While uncertainties
abound, and some new ones have
arisen since the election, moving past
election uncertainty should help stabilize growth. Consumer spending will
account for most of economic growth
in 2017 - a bright spot in an otherwise
melancholy environment.
Stronger fixed investment in 2017
will also contribute to a stronger
economic picture. After growing five
percent in 2015, nonresidential fixed
investment grew only 0.8 percent in
2015 and a meager 0.6 percent in
2016, contributing only one-tenth of
one percent to GDP in 2016. While
business fixed investment is a function
of growth, and slower growth means
less investment, higher oil prices in
2017 should bring stronger investment
in oil drilling infrastructure.
94

JANUARY/FEBRUARY 2017

Inflation, Interest Rates and
Dollar Strengthen
2017 will likely bring tax cuts and spending
increases which will support higher nearterm economic growth. However, these
fiscal measures will likely push inflation,
interest rates and the value of the dollar
higher. While still well maintained,
inflation will edge slowly higher with a
strengthening dollar and upward movements in oil prices. Anchored inflation
expectations of two percent should also
drive inflation higher as will continued
tightening in the labor market.
Interest rates will also move higher
in 2017. Vice Chairman of the Federal
Reserve Board of Governors Stanley
Fischer recently noted, "While there is disagreement about what the most effective
policies would be, some combination of
improved public infrastructure, better education, more encouragement for private
investment, and more effective regulation
all likely have a role to play in promoting
faster growth of productivity and living
standards. By raising equilibrium interest
rates, such policies may also reduce the
probability that the economy, and the
Federal Reserve, will have to contend more
than is necessary with the effective lower
bound on interest rates."
In other words, policies that drive
productivity and enhance living standards will have the added benefit of rising
interest rates and improving the tool

No Recession in 2017,
but One in 2018
I believe we miss a recession in 2017,
with most factors leaning towards growth.
However, the risk of a recession gets
marginally more difficult to avoid by the
fall of 2018. If we make it through 2017
sans recession, we will be in the midst of
one of the longest periods of economic
expansion in the history of the country.
Despite the tepidness of the expansion, we
are likely due a recession in 2018.
There are plenty of risks that keep me
up at night and a myriad of uncertainties
that continue to weigh on expectations.
While we expect fiscal stimulus in 2017,
it isn't clear how this will be paid for or
over what timeline. The risk of trade wars
because of protectionary maneuvers or a
shrinking labor force because of changing
immigration policy could dampen
economic expectations. While unlikely,
a surge in oil prices could significantly
dampen economic prosperity. There are
risks to continued growth in household
net worth.
Asset price valuations are a concern -
with both equities and bonds overvalued.
Lending standards remain tight which
likely curtails continued appreciation
of home prices. Globally, a sharper
slowdown in China will reverberate
through the global economy and already
has adversely impacted commodity
rich countries. Widening conflict in the
Middle East, instability in Turkey, and
problems in the European periphery
remain key global risks. All told, a large
number of risks, with differing probabilities, weigh on the outlook - especially as
we move beyond the next 12 months. ■
I T I S I N N O VAT I O N



i3 - January/February 2017

Table of Contents for the Digital Edition of i3 - January/February 2017

Contents
i3 - January/February 2017 - Cover1
i3 - January/February 2017 - Cover2
i3 - January/February 2017 - 1
i3 - January/February 2017 - Contents
i3 - January/February 2017 - 3
i3 - January/February 2017 - 4
i3 - January/February 2017 - 5
i3 - January/February 2017 - 6
i3 - January/February 2017 - 7
i3 - January/February 2017 - 8
i3 - January/February 2017 - 9
i3 - January/February 2017 - 10
i3 - January/February 2017 - 11
i3 - January/February 2017 - 12
i3 - January/February 2017 - 13
i3 - January/February 2017 - 14
i3 - January/February 2017 - 15
i3 - January/February 2017 - 16
i3 - January/February 2017 - 17
i3 - January/February 2017 - 18
i3 - January/February 2017 - 19
i3 - January/February 2017 - 20
i3 - January/February 2017 - 21
i3 - January/February 2017 - 22
i3 - January/February 2017 - 23
i3 - January/February 2017 - 24
i3 - January/February 2017 - 25
i3 - January/February 2017 - 26
i3 - January/February 2017 - 27
i3 - January/February 2017 - 28
i3 - January/February 2017 - 29
i3 - January/February 2017 - 30
i3 - January/February 2017 - 31
i3 - January/February 2017 - 32
i3 - January/February 2017 - 33
i3 - January/February 2017 - 34
i3 - January/February 2017 - 35
i3 - January/February 2017 - 36
i3 - January/February 2017 - 37
i3 - January/February 2017 - 38
i3 - January/February 2017 - 39
i3 - January/February 2017 - 40
i3 - January/February 2017 - 41
i3 - January/February 2017 - 42
i3 - January/February 2017 - 43
i3 - January/February 2017 - 44
i3 - January/February 2017 - 45
i3 - January/February 2017 - 46
i3 - January/February 2017 - 47
i3 - January/February 2017 - 48
i3 - January/February 2017 - 49
i3 - January/February 2017 - 50
i3 - January/February 2017 - 51
i3 - January/February 2017 - 52
i3 - January/February 2017 - 53
i3 - January/February 2017 - 54
i3 - January/February 2017 - 55
i3 - January/February 2017 - 56
i3 - January/February 2017 - 57
i3 - January/February 2017 - 58
i3 - January/February 2017 - 59
i3 - January/February 2017 - 60
i3 - January/February 2017 - 61
i3 - January/February 2017 - 62
i3 - January/February 2017 - 63
i3 - January/February 2017 - 64
i3 - January/February 2017 - 65
i3 - January/February 2017 - 66
i3 - January/February 2017 - 67
i3 - January/February 2017 - 68
i3 - January/February 2017 - 69
i3 - January/February 2017 - 70
i3 - January/February 2017 - 71
i3 - January/February 2017 - 72
i3 - January/February 2017 - 73
i3 - January/February 2017 - 74
i3 - January/February 2017 - 75
i3 - January/February 2017 - 76
i3 - January/February 2017 - 77
i3 - January/February 2017 - 78
i3 - January/February 2017 - 79
i3 - January/February 2017 - 80
i3 - January/February 2017 - 81
i3 - January/February 2017 - 82
i3 - January/February 2017 - 83
i3 - January/February 2017 - 84
i3 - January/February 2017 - 85
i3 - January/February 2017 - 86
i3 - January/February 2017 - 87
i3 - January/February 2017 - 88
i3 - January/February 2017 - 89
i3 - January/February 2017 - 90
i3 - January/February 2017 - 91
i3 - January/February 2017 - 92
i3 - January/February 2017 - 93
i3 - January/February 2017 - 94
i3 - January/February 2017 - 95
i3 - January/February 2017 - 96
i3 - January/February 2017 - 97
i3 - January/February 2017 - 98
i3 - January/February 2017 - 99
i3 - January/February 2017 - 100
i3 - January/February 2017 - 101
i3 - January/February 2017 - 102
i3 - January/February 2017 - 103
i3 - January/February 2017 - 104
i3 - January/February 2017 - 105
i3 - January/February 2017 - 106
i3 - January/February 2017 - Cover3
i3 - January/February 2017 - Cover4
https://www.nxtbook.com/nxtbooks/manifest/i3_20210304
https://www.nxtbook.com/nxtbooks/manifest/i3_20210102
https://www.nxtbook.com/nxtbooks/manifest/i3_20201112
https://www.nxtbook.com/nxtbooks/manifest/i3_20200910
https://www.nxtbook.com/nxtbooks/manifest/i3_20200708
https://www.nxtbook.com/nxtbooks/manifest/i3_20200506
https://www.nxtbook.com/nxtbooks/manifest/i3_20200304
https://www.nxtbook.com/nxtbooks/manifest/i3_20200102
https://www.nxtbook.com/nxtbooks/manifest/i3_20191112
https://www.nxtbook.com/nxtbooks/manifest/i3_20190910
https://www.nxtbook.com/nxtbooks/manifest/i3_20190708
https://www.nxtbook.com/nxtbooks/manifest/i3_20190506
https://www.nxtbook.com/nxtbooks/manifest/i3_20190304
https://www.nxtbook.com/nxtbooks/manifest/i3_20190102
https://www.nxtbook.com/nxtbooks/manifest/i3_20181112
https://www.nxtbook.com/nxtbooks/manifest/i3_20180910
https://www.nxtbook.com/nxtbooks/manifest/i3_20180708
https://www.nxtbook.com/nxtbooks/manifest/i3_20180506
https://www.nxtbook.com/nxtbooks/manifest/i3_20180304
https://www.nxtbook.com/nxtbooks/manifest/i3_20180102
https://www.nxtbook.com/nxtbooks/manifest/i3_20171112
https://www.nxtbook.com/nxtbooks/manifest/i3_20170910
https://www.nxtbook.com/nxtbooks/manifest/i3_20170708
https://www.nxtbook.com/nxtbooks/manifest/i3_20160102
https://www.nxtbook.com/nxtbooks/manifest/i3_20160304
https://www.nxtbook.com/nxtbooks/manifest/i3_20160506
https://www.nxtbook.com/nxtbooks/manifest/i3_20160708
https://www.nxtbook.com/nxtbooks/manifest/i3_20170506
https://www.nxtbook.com/nxtbooks/manifest/i3_20170304
https://www.nxtbook.com/nxtbooks/manifest/i3_20170102
https://www.nxtbook.com/nxtbooks/manifest/i3_20161112
https://www.nxtbook.com/nxtbooks/manifest/i3_20160910
https://www.nxtbookmedia.com