Significant Changes in the Consensus – January 8, 2018

The second half of 2017 marked positive progress for most of the global economy, amid further signs of a firm revival in Euro area prospects prompted by aggressive policy measures by the European Central Bank (ECB) and its EU neighbours (Riksbank, Swiss National Bank etc.). ECB plans to begin withdrawing stimulus later this year may pose a threat to the recovery for those heavily reliant on cheap borrowing, but business sentiment across the bloc is close to record-high levels, buoyed by strong consumer spending and industrial output. The Euro zone manufacturing PMI surged to an all-time high in December. The US Federal Reserve hiked rates twice in 2017, supported by a tightening jobs market, pushing inflation expectations above 2% in 2018.


Gross Domestic Product 2018 Consensus Forecasts from survey of: 2019 Estimate
Oct. ’17 Nov. Dec. Jan. ’18
USA 2.4 2.5 2.5 2.7 2.4
Japan 1.2 1.3 1.3 1.4 1.1
Germany 1.9 2.0 2.2 2.3 1.8
UK 1.4 1.4 1.5 1.4 1.5


Congress approved an overhaul to the US tax system in late December which includes a significant cut in corporation taxes; a boon for businesses that may help drive growth above 2.7% in 2018. Recent GDP reports in Japan have impressed, with a revised Q3 2017 figure of 2.1% (y-o-y), the fastest pace in two years. Improving business sentiment and the current 24-year-low jobless rate bode well for the outlook, although muted price pressures may encourage policymakers to continue with accommodative fiscal and monetary policies. The UK economy has held up better than some expected but growth remains on a downward bent. The uncertainty over its EU departure appears to have delayed investment decisions, while households have felt the pinch from higher consumer prices. 2018 CPI estimates for Germany and France have risen, and a subsequent advance in inflation is likely in 2019.


Consumer Price Inflation 2018 Consensus Forecasts from survey of: 2019 Estimate
Oct. ’17 Nov. Dec. Jan. ’18
USA 2.0 2.1 2.1 2.1 2.1
Japan 0.7 0.7 0.8 0.9 1.1
Germany 1.6 1.6 1.7 1.7 1.8
UK 2.6 2.6 2.6 2.6 2.2


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Taken from Consensus Forecasts – G7 and Western Europe, January 2018.