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What is the Economic Outlook for 2017?

What is your forecast for the U.S. economy? In a recent report, CBRE’s Economic Advisors present four scenarios based on the following assumptions:
  • The U.S. economy is the strongest it’s been since the Great Recession.
  • President Trump’s policy agenda has not been implemented, but his proposals will have mixed effects on the economy and commercial real estate.
  • Employment and GDP growth will gradually slow before a contraction in 2019.
  • The Fed will likely make three rate hikes in 2017 and the 10-year bond will move closer to 3%.
  • Interest rates and inflation will gradually increase in 2017.
  • U.S. real estate will remain attractive with strong fundamentals and limited risk.

1. Baseline Scenario

A short, technical recession beginning in 2019 with a net employment loss of approximately 500,000 jobs.  Commercial real estate pricing will moderate with negative rent growth in most property types by 2019 or 2020. 



2. Upside Scenario
This scenario is based on the assumption that President Trump’s fiscal policies, such as tax reform and an increase in infrastructure spend, will stimulate business growth, but the tariff and immigration policies do not materialize or are scaled back. This setting will accelerate job growth over 2017 and 2018 and inflation and interest rates will rise. This scenario would delay a recession within the 10-year forecast period.


3. Downturn Scenario
This scenario would likely be as a result of market turbulence due to geopolitical events, trade war, poorly enacted policies, or uncertainty about monetary and fiscal policy. Episodes of uncertainty can cause financial markets to whipsaw quickly.



4.Severe Downturn Scenario
This scenario would mirror the deep recession that began in 2007 which would be induced by a dramatic crisis as experienced by the capital adequacy of the U.S. banks and bailouts. According to CBRE Econometric Advisors, this severe downside scenario has an extremely low probability.



Which of the scenarios will come to fruition? This report is a must read in order to align strategies that best maintain and increase your real estate portfolio and lead to company success. Call or email us with questions, comments, or additional insights as it impacts the local real estate market.


Click here to download the Econometric Advisors Insights Report, Q4 2016

 
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