The US Economy Will Be Playing By New Rules In 2015

Gdp forecast 2016 wells fargoWells FargoWells Fargo GDP forecasts

2015 will be a game-changer for the US economy and for global markets.

In their 2015 Economic Outlook, Wells Fargo’s economics group lets loose with sports metaphors, writing that the economy is transitioning to an offensive strategy.

The first few years of the recovery have been defensive, characterised by loose monetary policy and low interest rates. But all this is changing:

“These defensive measures helped keep the economy in the game, yet they did not put many points on the board. Economic growth has averaged a modest 2.3 per cent since the end of the recession, and our current estimate calls for real GDP to have grown by roughly that magnitude once again this past year. Although overall growth maintained roughly the same pace as in prior years, the composition of growth has shifted, and will adjust further in 2015. The team is finally beginning to gel, and all of the domestic sectors of the economy are growing again.”

The firm see the US economy expanding between 2.5 and 3% over the next two years, the fastest pace since the boom between 2004 and 2007.

The US is also expected to be the “bright spot” in the global economy, as other advanced economies are forecast to grow only modestly.

“Most developing countries, with the notable exception of China … should also experience stronger growth over the next two years.” These countries will be helped by the type of loose monetary policy the Bank of Japan is implementing and that Wells expects the ECB to undertake.

And while the FOMC is forecast to start raising rates next June, the ECB and Bank of Japan will continue to fight off deflation. ‘

Wells expects that this policy divergence will continue to support the dollar.

And so like we’ve seen from other firms like BlackRock, Wells Fargo expects 2015 to be the year the US economy breaks out and stands on its own two feet.

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