Survey evidence points to solid GDP growth

The survey evidence has strengthened considerably in recent months and even though fourth-quarter GDP growth will probably fall back to 2.2% annualised, as the third-quarter spike in exports is reversed, the outlook for 2017 is encouraging. Assuming a major fiscal stimulus is passed in the first half of next year, which is our baseline scenario, we anticipate that GDP growth will accelerate to 2.7% for next year as a whole. The quicker the stimulus is passed, however, the quicker the temporary boost to incomes and spending from lower taxes will fade. We then expect GDP growth to slow again to 2.2% in 2018 and there is a real possibility of a severe slowdown or even a mild recession in 2019.