Country Economic Forecasts > United States

Recent data point to GDP growth rebounding to around 2.5% in Q3, but then moderating to below 2% in Q4. Overall, the consumer maintains solid momentum supported by reasonable income growth while business investment remains constrained by a flurry of headwinds and the absence of 'animal spirits'.In the near-to-medium term, we see employment growth slowing in a maturing labor market but wage growth picking up the income growth baton. Since the trade-off will not be one-for-one, we expect income and consumer spending growth to moderate gradually towards 2%. Business investment meanwhile will remain weak constrained by soft final demand globally and domestically.  We expect real GDP growth of 1.5% in 2016 (down from 1.6% previously) and foresee a modest rebound to 2.0% in 2017 (from 2.3% previously). While this is faster than our estimate of long-run potential output growth (about 1.6%), we expect the Fed will proceed very gradually in tightening monetary policy amid a slowly closing output gap, with only one rate hike pencilled in for 2017 (mid-year), down from two previously.