A strong labour market, robust consumer confidence and the gradual return of first-time buyers means that the demand for homes will see further gains even as mortgage interest rates rise. But with inventory levels unlikely to improve much over the next year, home sales will struggle to gain traction, while house prices will rise by 6%. Beyond 2017, supply conditions are set to improve gradually as more homes are built, which will ease the upward pressure on prices.
President Trump’s failure to get health care reform through Congress suggests any fiscal stimulus is likely to be delayed until early next year. Even so, the recent strength in survey evidence indicates that GDP growth will be a healthy 2.3% this year, up from 1.6% in 2016. The stimulus will then help boost GDP growth to 2.5% in 2018, before tighter monetary policy triggers a slowdown in growth to 1.7% in 2019.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services