At the three-quarter pole, the global economy is muddling through a disappointing 2016. Growth in developed and emerging markets continues, but at a pace that has fallen short of expectations. Populism is spreading across the world electorate, central banks may be giving way to fiscal stimulus, and Brexit is back on the front burner.

Despite these risk factors, the current expansion should continue at a modest pace into next year. Inflation is generally expected to remain range-bound, limiting the reaction of central banks. Several jurisdictions may stress fiscal policy over monetary remedies as a path to better performance. Politics and China’s performance remain at the top of the watch list.



UNITED STATES

Economic growth in the second half of 2016 should exceed the pace of activity seen in the first two quarters. The fundamentals are in place to support continued forward business momentum in 2017. Consumer spending is projected to advance at levels comparable to recent trends. Business spending appears to be stabilizing, following a weak performance in the past three quarters. The housing sector’s soft readings are anticipated to turn around, given favorable employment conditions and low interest rates. With the current solid labor market numbers, the Fed’s full employment mandate is close to be being satisfied.

As the impact of a strong dollar and low energy prices fade, inflation is likely to move closer to the Federal Reserve’s 2.0% target. Oil prices are not, however, expected to rise enough to significantly rekindle drilling activity in the United States.