GDP Growth Could Modestly Accelerate in 2017

Jeremy Glaser: We had 1.6% for the full-year 2016; where do you see 2017 then?

Bob Johnson: I think it will be somewhere between 1.75% and 2%. I mentioned earlier that inventory took off about a quarter of a percent. I think that will probably be flat this year. It's unusual that it had that big a subtraction, so I think that we'll get back to 2% from that and then you've got the demographic headwind and you'll probably be somewhere in that 1.75% to 2% range. A little better than the full-year 2016 number, but certainly not as large as many people are expecting.

Glaser: How do you factor in the impact of, say, comprehensive tax reform or big infrastructure projects or anything that could come out of the new administration?

Johnson: That's going to take a little bit more time, I think, and I think those things could all be very helpful. Don't get me wrong on that. I think some of repatriation issues or things that begin to favor some of the exports versus import taxation moving to more consumption-based taxation, if any of those things happen, they're all exceptionally positive things, but they all take time to get passed through Congress and by the time they flow through the GDP numbers it could be a while. Unfortunately, to get some of those nice goodies, oftentimes there's other things that are going to have to offset that and I think people often miss that, oh yeah, maybe that will hurt the farmers instead of the manufacturers, and issues like that. It's not as clear-cut as people think, that it's all a one-way street.

Certainly, to get things passed, you're going to have to give away some as well. You roll all those three factors together and I don't put a lot in there. I see a lot of other people, IMF, a very smart group of economists, have added a couple of tenths to their U.S. GDP estimate based on the potential for new stimulus measures and tax rate cuts, but I think those are all a little bit high.

Glaser: Bob, thanks for your take on this report today.

Johnson: Thank you.

Glaser: For Morningstar, I'm Jeremy Glaser. Thanks for watching.