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Jim Glassman on the 2018 Economic Outlook

The following article is part of Money Matters, a Chase series that unpacks economic and financial trends, and issues.

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There are a lot of positives for the economy coming out of 2017. In the last year, we've seen unemployment hit new lows and the stock market hit record highs.

Looking ahead, we have good reason to remain optimistic. Real GDP appears likely to expand close to 3 percent in the coming year, a big improvement over the 2 percent growth seen in 2015 and 2016.

These are a few other key areas that will be worth watching in 2018.

1. The Impact of the Global Economy

The first is the global economy, which has been picking up speed. In response, some central banks have begun removing stimulus policies, while others indicate they're moving in that direction.

Faster global growth, combined with a decline in the value of the dollar, has sparked more demand for US goods abroad. The increase in exports is helping provide a boost in profits for US companies.

2. The Demand Placed on the Energy Sector

Second, the energy sector will be interesting to watch in the year ahead. The drag coming from the adjustment to lower energy prices, particularly in the "energy belt," is passing—and oil prices are beginning to stabilize. Back in 2016, low prices at the pump led to record high levels of demand for gasoline in the US.

But that demand has since leveled off, and might even decline over the next decade. In contrast, foreign demand for oil continues to rise and doesn't appear to be slowing—which is good news for the US energy industry.

In 2016, the US became the world's leading net exporter of fuel, thanks largely to the developments in shale technology. As demand for oil around the rest of the world continues to rise—the 94 million vehicle sales seen in 2016 points to strong future energy needs—we could see the price of oil climb as a result. If that happens, look for US refiners to ramp up production in 2018.

3. The Stock Market's Journey

Finally, these favorable developments are reinforced by the stock market and its impact on consumers. Strong corporate earnings and solid job growth over the past year are two important factors that contributed to the stock market reaching record heights.

As the market climbs higher, more money is put into the hands of consumers. We saw consumer spending pick up throughout 2017. If markets continue to climb, we'll likely see consumers continue to spend more.

For a full version of the 2018 outlook, please refer to Jim Glassman's perspective.

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