Posted by: coastcontact | December 28, 2014


Happy Face 

Happy New Year!!

The New Year could be one of the best for Americans. There are many indicators to support this forecast. That would not include Nouriel Roubini. He has a history of negative forecasts so I wouldn’t pay attention to him.

Beaconomics forecasts Incomes, Consumer Spending on the Rise: As job growth continues, worker incomes are expected to expand in 2015, something that will keep consumer spending growing and encourage those who have dropped out of the workforce to re-enter.

The GDP for the third quarter of 2014 initially reported growth of 3.5% and subsequently has raised that number to 5%. Unemployment is now reported at 5.8% which is not great but is definitely going in the right direction. The stock market has set new records this year and is now at a new high that won’t help everyone but will motivate people to spend and perhaps hire more people.  Gasoline is at unbelieveably low prices.

Goldman Sachs’s chief economist Jan Hatzius just published answers to what he believes are the eight top questions for next year.

Here’s a list of the questions asked by Business Insider and a quick summaries of his thoughts:

  1. Will the US economy continue to grow above trend? Yes. Domestic strength should offset weakness from other economies.
  2. Will the dollar appreciation weigh on growth? Yes, but it’s manageable in the short term because of lower oil prices.
  3. Will the housing recovery accelerate? Yes, especially in the single-family sector. Household formation should improve as young adults move out of their parents’ homes.
  4. Will consumer spending growth accelerate? Yes, as real disposable income increases because of lower oil prices.
  5. Will capital spending growth accelerate further? No. Business capital spending does not look depressed relative to the long-term fundamentals and the decline in oil prices is likely to take a toll on energy sector.
  6. Will wage growth move into the 3%-4% range identified by Chair Yellen as “normal”? No. There’s still slack in the labor market as measured by the U6 underemployment rate.
  7. Will core inflation rise toward the Fed’s 2% target?No. The dollar is strong, wage growth is low, and depressed oil prices should have a negative impact.
  8. Will the Fed hike rates by the June FOMC meeting? No, because inflation probably won’t hit the 2% target. “Based on our below-consensus forecasts for wage and price inflation we expect the first funds rate hike to occur after June 2015; our base case is September,” Hatzius said.

So in summary, the US economy will grow together with the dollar, faster than its global peers. But inflation below the Fed’s target will push its rate hike back to at least September, and the impact of lower oil prices will continue to be felt throughout the economy.

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  1. Thank u


    • You need to write more than “thank you”

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