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Economists: U.S. to Pace World Growth in 2016

  • By Ira Apfel
  • Published: 12/28/2015
For more perspectives on the economy in year ahead, check out the 2016 AFP Business Outlook Survey, underwritten by SWIFT. DOWNLOAD

2016startStop us if you’ve heard this before: The United States economy in 2016 will be a beacon of economic light in a cloudy global growth environment.

It’s an annual theme that has repeated itself since the global financial crisis ended, and it shows no signs of stopping. According to exclusive interviews with economists from several global financial services institutions, Uncle Sam will lead the way next year.

There is one wrinkle to the story. Foreign economies will gather steam in 2016—surely a good sign for the global economy. Perhaps 2017 will be the year a new economic story emerges.

Josh Nye, Economist, RBC Economics Research, U.S. Economy:
Our forecast is for U.S. GDP growth to pick up to 2.8 percent in 2016 from 2.5 percent in 2015. The solid gain in 2015 largely reflected support from U.S. households as consumer spending and residential investment both picked up strongly. Those trends are expected to continue in 2016 given a healthy labor market, an expected acceleration in wage growth, and accommodative financial conditions. Relative to 2015, however, growth is likely to be more broad-based with stronger contributions from other areas of the economy.

Nonresidential investment, which was weighed down by contractions in the oil and gas sector in 2015, is expected to grow at a stronger pace in 2016 as a more modest pullback in the energy industry is offset by stronger business investment in other areas of the economy. Government spending increased on aggregate in 2015 for the first time in five years and we expect an even larger, albeit still modest, contribution in 2016 as federal spending restraint diminishes.

Chris Rupkey, Managing Director and Chief Financial Economist, MUFG Union Bank:
Generally, I am cautiously optimistic with continued expansion expected for GDP growth roughly 2.5 percent in 2016. This percent sounds slow, but the strong dollar is taking a toll on U.S. exports, so there is less growth there. But the consumer is doing well, and I expect real consumption expenditures of nearly 3 percent in 2016.

Why is the consumer spending? For one thing, there are more of them with 2.4 million private payroll jobs being created so far this year from January to October. The labor market, with its 5.0 percent unemployment rate, is at full employment. This means wages and inflation will start to increase somewhat, although not to worrisome levels.

Kevin R. Logan, Chief Economist, USA Global Research, HSBC: We expect GDP growth of 2.3 percent and CPI inflation of 1.6 percent. Steady increases on consumer spending and a rebound in government spending will power the economy’s growth, offsetting a growing drag from a decline in net exports. The rise in the dollar’s average exchange rate over the past year will keep downward pressure on inflation in 2016, but will also have the lagged effect of suppressing the growth in U.S. exports.

Richard Saperstein, Chief Investment Officer, Treasury Partners: United States GDP is set to grow 2.0-2.5 percent in 2016, with sustained employment gains further driving the unemployment rate to 4.5 percent by the end of 2016. Consumers remain healthy and will benefit from lower oil prices and rising employment. Core U.S. manufacturing will face ongoing U.S. dollar headwinds.

Domestic inflation expectations remain low yet will increase modestly in 2016. The year-over-year drag from lower oil and import prices will begin to roll off and pressure from rising owner-equivalent rents and employee wages will start to build. These factors could contribute to a normalization of headline inflation measures, which may surprise the markets.

A longer version of this article appears in the December edition of AFP Exchange.

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