A Taxing Time

There has been no let-up to the economic news cycle this year. Even the approach of the holiday season has failed to offer a respite, with tax reform deliberations ongoing through the holidays.

We’ve been hesitating to send out an update to our U.S. outlook, awaiting final word from Washington. With passage of reform now likely and major details now public, we’re venturing a guess as to how the economy might react to the substantial fiscal stimulus that is being offered.

A word of caution is in order. Many details of the bill came together at the eleventh hour and are not well understood. Experts are already predicting a series of technical corrections to the new rules in the coming year to avert unintended consequences. Final amendments could certainly affect specific taxpayers, but we are assuming that they will not have a substantial influence on the broader economy.

Key Economic Indicators

Influences on the Forecast

  • Holiday spending has been excellent so far, with retail analysts expecting this to be the best shopping season since 2010. November retail sales exceeded expectations by a wide margin. Strong employment news and accumulating wealth effects from strong markets are buoying consumers, and should continue to do so. We’re holding our fourth quarter growth estimate at 2.7%, but there is upside potential.