The transition towards a self-sustained recovery in the US is supported by strengthening internal demand, driven by recovering capital expenditure and household consumption. Giordano Lombardo, Global CIO at Pioneer Investments, in an update posted in the asset managers blog follow Pioneer, expects to see mixed signals coming from economic activity indicators and labor market as the economy normalizes, but does not expect the trend in the main drivers of growth to be derailed.
Pioneer Investment’s growth estimates for 2014 in the US are:
- U.S. GDP growth of 2.8%.
- Personal consumption estimated to grow at a moderate pace and then accelerate in the second half of the year.
- Inflation expected to remain below 2% but step up gradually during the year.
- Non-Residential Investments to accelerate in the second half of the year, giving momentum to acceleration in capital expenditures.
If the economy develops as the Fed currently forecasts GDP growth around 3% in 2014 and 3-3.5% in 2015, unemployment around 6% by the end of 2015 – Pioneer Investments expects QE to be wound down by the end of 2014. Interest rates could then start to slowly increase during 2015 (Fed Fund futures currently project rates to slowly start to rise above the current 0.25% level in the autumn of 2015).
Potential Catalysts to U.S. Economic Growth
- Stronger-than-expected global demand, supported by a stronger economic performance of the Euro Area could support both confidence and exports, and somewhat offset the impact from weaker growth in emerging economies.
- A productivity pick-up, accelerating the pace of recent weak growth.
- Stable improvements in the consumer sector balance sheet, coupled with stable income growth and progressive improvements in the labor market could support higher patterns of consumption.
Potential Risks to U.S. Economic Growth
- A significantly stronger dollar might adversely impact the export sector by making U.S.-produced goods and services more expensive in foreign markets.
- After years of shedding debt, the U.S. consumer might be more reluctant to spend, detracting from growth momentum.
- Geopolitical tensions, involving directly or indirectly the U.S. could be highly disruptive for the flow of oil and for financial markets in general.
Data Source: Pioneer Investments