NY Fed’s Economic Projections
NY Fed released a summary of econ projections through 2015 (link above). Unsurprisingly, they expect growth to pick up and inflation to gently rise. Factors that had been restraints are abating.
From the NY FED:
From the end of the Great Recession in mid-2009 through mid-2013, the U.S. economy grew at a compound annual rate of 2.2 percent. Then, over the second half of 2013 growth picked up to 3.4 percent (annual rate), reflecting stronger growth of real personal consumption expenditures (PCE), business fixed investment, exports, and inventories. However, in the first quarter of 2014, real GDP was essentially unchanged. The growth contributions from inventories and net exports, which had been positive over the second half of last year, were negative in the first quarter, which was widely anticipated. But in addition, severe winter weather had a significant depressing effect on economic activity, particularly in January and February.
Despite the slow start in the first quarter, the staff forecast anticipates economic growth of around 3 percent (annual rate) over the remainder of 2014, with some additional strengthening to around 3½ percent in 2015. Several key underlying fundamentals of the economy have improved, setting the stage for a firming of growth. Household wealth has been restored, and the deleveraging process is largely over. For the first time since 2008, we are beginning to see growth of total household liabilities. The excess supply of housing has been largely worked off, and home prices have risen more than expected, contributing to higher household wealth. Fiscal restraint at the federal and the state and local levels of government now is, for the most part, behind us. And growth prospects among our major trading partners look somewhat better, particularly in the euro area.
As always, everyone from the Fed anticipates growth of 3% or more. Though, as can be seen from table below, the Fed’s Projections for growth are consistently lowered at every quarterly meeting. Actual 2013 growth was 1.9; at the March 2013 the estimate was 2.3 to 2.8. “Household wealth has been restored…” Sure, stocks have gone up and housing has improved due to repressed financing rates. But as soon as rates went up in the second half of 2013, mortgage applications started to fall and housing slowed (lower panels below). Additionally, home ownership rates have declined, activity is becoming more concentrated in the rental sector, more real estate deals are being done in cash. Non-revolving credit is NOT growing, student loan debt (non-revolving) has exploded. Corporate debt has increased to finance buybacks and dividend payouts. Is that really a solid foundation on which to project increased growth? I do agree that restraining factors in state and federal govt have largely abated. But I don’t exactly see how growth is expected to pick up in the eurozone when the ECB is increasingly expected to ease to offset deflationary pressure. Growth in China is also slowing.
What if stock prices sell off? And the much vaunted “wealth effect” goes into reverse?
|
2013 |
2014 |
||
| ACTUAL 2013 GDP GROWTH>> |
1.9 |
Q1 2014 0.1 | |
| MAR 2013 FOMC | |||
| Chg in GDP for 2013 | 2.3 to 2.8 | 2.9 to 3.4 | |
| Last meeting projection | 2.3 to 3.0 | 3.0 to 3.5 | |
| JUNE 2013 FOMC | |||
| Chg in GDP for 2013 | 2.2 to 2.6 | 3.0 to 3.5 | |
| Last meeting projection | 2.3 to 2.8 | 2.9 to 3.4 | |
| SEPT 2013 FOMC | |||
| Chg in GDP for 2013 | 2.2 to 2.3 | 2.9 to 3.1 | |
| Last meeting projection | 2.3 to 2.6 | 3.0 to 3.5 | |
| DEC 2013 FOMC | |||
| Chg in GDP for 2013 | 2.2 to 2.3 | 2.8 to 3.2 | |
| Last meeting projection | 2.0 to 2.3 | 2.9 to 3.1 | |
| MARCH 2014 FOMC | |||
| Chg in GDP for 2014 | 2.8 to 3.0 | ||
| Last meeting projection | 2.8 to 3.2 | ||
REVOLVING CREDIT GROWTH (source FRB)
Q1 2013 1.3%
Q2 2013 1.0%
Q3 2013 0.9%
Q4 2013 2.0%
Q1 2014 -0.4%
(is this a strongly improving trend?)
HOME MORTGAGE GROWTH (source FRB Z.1)
Q1 2013 -2.0%
Q2 2013 -1.1%
Q3 2013 0.9%
Q4 2013 -1.0%
(is this growth?)
CORPORATE CREDIT GROWTH (source FRB Z.1)
Q1 2013 7.2%
Q2 2013 9.3%
Q3 2013 10.3%
Q4 2013 8.2%
