WalletHub’s 10 Predictions for 2017

By December 27, 2016News, Uncategorized

As 2016 draws to a close, WalletHub has made its economic predictions for 2017. Based on the current economic recovery and the inauguration of a new president, here are 10 important developments expected in the new year.

U.S. GDP growth will remain at 2.1 percent

The U.S. economy is expected to end 2016 having grown by about 1.75 percent, and projections for 2017 aren’t much higher. All things considered, WalletHub foresees GDP growth of roughly 2.1 percent in 2017, which is well below the 3.36 percent annual average dating back to 1930.

Unemployment will finish around 5 percent

At 4.6 percent as of November, the unemployment rate is below the historic average of 5.8 percent, according to Bureau of Labor Statistics data since 1948. Unemployment currently is at the lowest point since 2007, indicating there is little room for further improvement. With that in mind, WalletHub expects the unemployment rate to settle around 5 percent during 2017.

The S&P 500 won’t do much better than an online savings account

Stocks still are quite expensive, with shares of the average company in the S&P 500 trading at roughly 26 times earnings, compared with a historic average of just under 16 times. WalletHub expects the S&P to finish 2017 at about 2,288, which represents a gain of just 0.75 percent from current levels. For context, the average online savings account has a 0.65 percent APY, according to WalletHub’s latest Banking Landscape Report.

U.S. auto sales will surpass $17 million for the third straight year

Total light-vehicle sales have risen consistently since September 2009, reaching a record high of 17.4 million units in 2015 that might be narrowly surpassed this year. And 2017 is shaping up to provide more of the same, with expectations for another 17-plus million units sold and the potential for a new annual record.

Existing home sales will rise to $6 million

WalletHub expects existing home sales to increase by roughly 200,000 units from the 5.8 million forecast for year-end 2016 by the National Association of Realtors. Interestingly enough, higher rates might actually be the reason for the growth.

The Fed will raise rates twice

WalletHub predicts there will be two quarter-point increases, bringing the Fed’s target rate to 1.00 percent-1.25 percent by the end of the year. It also expects the rates at which consumers pay interest on loan and lines of credit to mirror the Fed’s target. Credit card rates were up 25 basis points through the first half of the year, following the Fed’s 25 basis-point hike last December, before increasing further during the third quarter in expectation of another Fed move.

Credit card debt will break all-time records

This was a record-setting year for consumer credit card debt. The smallest first-quarter pay down since 2008 was seen, as well as the biggest second- and third-quarter build-ups since 2007. The U.S. also is on track to end 2016 with the largest net increase in credit card debt since 2007, at $80 billion.

Consumer credit scores will peak at 675

Credit scores have risen steadily since the end of the Great Recession, and this recovery is expected to culminate in 2017, as the last derogatory records from recession-era struggles fall off consumers’ credit reports. As a result, the average person’s credit score should rise from its current level of 668 to about 675 in 2017. Annual credit-score increases should begin to level off thereafter as interest rates rise, balances become unsustainable and default rates rebound to historic norms.

The Consumer Financial Protection Bureau won’t die

The CFPB has been under fire since it was formed in 2010, and with the Republican Party now in firm control of Washington, there is concern that the young agency could be a casualty of the new administration’s policy changes. However, President-Elect Trump rode a populist wave to the White House, and it’s hard to tell how much grassroots support there would be for eliminating an agency that provided nearly $12 billion in relief for consumers wronged by financial institutions in just its first five years of existence.

Charge-offs will top $30 billion, limiting credit availability

Credit card debt has risen in recent years, by $40 billion in 2013, $59 billion in 2014 and $71 billion in 2015. If WalletHub’s projections hold true, the U.S. will finish 2016 with another $80 billion on its tab. That would represent a quarter of a trillion dollars in new credit card debt racked up in just four years. Yet the charge-off rate has remained largely unchanged, hovering near historical lows. At 2.86 percent through three quarters of 2016, the charge-off rate is just one-tenth of a percentage higher than in third-quarter 2015 and well below the 4.93 percent average from 2000 through 2007.