Forecasts compiled by Bloomberg show economists remain optimistic on growth for the full year. While the median estimate of analysts for first-quarter expansion has declined to 2.5 percent this month from 2.7 percent in February, the full-year projection has edged up to 2.8 percent from 2.7 percent.
Fed officials agree the outlook is relatively bright, even if they don’t share the White House’s view that 3 percent growth is sustainable. Jerome Powell, the central bank’s new chairman, told Congress this month the economy was “strong” and tax cuts would add “meaningfully to growth.” Economists predict an interest-rate hike on March 21, and are split on whether the Fed will raise three or four times this year.
A 2 percent quarter would be just shy of the 2.2 percent average growth since the recession ended in 2009, and in line with the Fed’s long-term growth estimates.
A report Friday showed consumer sentiment jumped to a 14-year high in March after tax cuts boosted disposable incomes, and the current conditions gauge was the highest in data back to 1946, according to the University of Michigan’s regular survey. But the expectations measure dropped, reflecting some concerns that Trump’s tariffs on imported steel and aluminum could hurt growth.
“Transitory factors have dampened activity but not confidence,” said Market Securities chief economist Christophe Barraud, ranked by Bloomberg as the top forecaster of the U.S. economy in the past three years. “The underlying trend seems to be robust as suggested by the improvement in the labor market. The fiscal reform and increases in federal spending will both produce positive effects in coming quarters.”