Initial 2016 Outlook: U.S. Growth to Continue as Global Growth Improves
By Jason Schenker, Prestige Economics, LLC for MHI Solutions
The economic climate for the balance of 2015 and 2016 is likely to be characterized by solid U.S. economic growth, an improving global economy, modestly rising commodity prices and continued foreign exchange rate volatility. In the new Material Handling Equipment Manufacturing (MHEM) forecast models, strong equity markets, low interest rates and continued manufacturing expansion are supportive of new orders. However, a strong dollar and expected increases in interest rates are likely to slow the growth of new orders.
As we enter the planning season for 2016, it is important for firms to understand the state of the U.S. economy, financial market risks to material handling and logistics and the factors that could impact business activity in the year ahead.
In 2016, the domestic U.S. labor market is likely to experience continued job creation, rising wages, and a falling unemployment rate. Because of the improving domestic labor market, and modest increases in inflation, the Fed is poised to gradually tighten U.S. monetary policy in 2016 and 2017. Nevertheless, the Fed is likely to take a measured approach to removing highly accommodative monetary policy. Furthermore, although interest rates are likely to increase in coming quarters, we expect between 18 and 36 months of solid U.S. growth before higher interest rates engender a correction domestically, which we expect is likely to begin in 2017 or 2018.