As the year draws to a close, it’s time to start looking ahead to what 2015 might bring. To help, the Securities Industry and Financial Markets Association Economic Advisory Roundtable this week released its forecast for next year.
The good news is that next year looks to be a continuation of the positive trends of 2014. The major economic indicators – inflation, unemployment, consumer spending and the price of oil – have all gone in positive directions this year.
“2015 could post the strongest economic growth in a decade,” said Diane Swonk, chief economist and managing director at Mesirow Financial Holdings and chairman of the SIFMA roundtable, in a release.
One negative has been the lack of growth in capital expenditures by businesses, Swonk said.
Besides the indicators, Republican control of Congress might make a difference in regulatory oversight of financial institutions. Slightly more than half of respondents to the roundtable’s survey (55%) said they expected that to be the case.
1. The Economy
For this year, economic growth of 2.3% is forecast, with the figure rising to 3% next year. The GDP number for 2015 might not seem huge but the roundtable notes that would be largest economic growth in a decade. “Continued employment gains, firming wages and somewhat les restrictive policy” will all help, said Swonk. Still, the bar is low as the economy tries to raise itself clear of the recession.
2. Monetary Policy
The Fed has kept the federal funds rate low for years and despite some loosening in policies, the roundtable expects the rate to be at 0.25% or lower through midyear. It also forecasts that the Federal Open Markets Committee will begin shrinking the Fed’s balance sheet by curtailing reinvestment of proceeds from asset holdings in the first quarter of 2016. 3. Unemployment
The unemployment has been falling and that’s a good thing in general, although how many people are underemployed and how many have stopped looking for jobs is unclear. Still, the roundtable sees the jobless rate falling to 5.4% by the end of 2015.
4. Inflation & Spending
The low climb in consumer prices is forecast to continue in 2015. The roundtable sees a 1.3% rise in the personal consumption chain price index. On the spending side, consumer spending is expected to rise slightly to 2.7% for 2015 from and expected 2.3% this year.
5. Oil Prices
The steep decline in oil prices that seen them drop to less that $55 a barrel is expected to help the economy if the trend continues. The chances of the price staying below $85 next year are put at 60%. Still the consensus of the roundtable is that the lower prices are due to oversupply and not because of lack demand, which means the effects are transitory.
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