Expects Eight Year Economic Expansion (2009-2017)
Economic forecasts for 2014 are being marked down just as the pace of global and U.S. economic growth is at a positive inflection point to faster growth, according to BNY Mellon Chief Economist Richard Hoey in his most recent Economic Update.
"The downward forecast revisions for 2014 reflect the mark-to-market of economic weakness which already occurred in the early months of this year," Hoey says. "We believe that these mark-to-market economic revisions are occurring just as both global growth and U.S. growth are at an inflection point to a somewhat faster pace of growth than has prevailed over the last several years. It is crucial to distinguish between the mark-to-market of what has already occurred and the prospects for growth over the next four to eight quarters, which should run at 3.5% to 4% for the global economy and close to 3% for the U.S. economy."
Citing a positive inflection point, Hoey believes that U.S. real growth averaged close to 2% over the past five years and will increase to an average of about 3% over the next several years. Hoey continues to expect a moderate but sustained economic expansion over the next several years in Europe, in the 1% to 1.5% growth range in 2014.
While China's economy has decelerated and the property sector is weakening, Hoey expects an orderly deceleration of trend growth rather than a major financial crisis and hard landing.
Hoey expects U.S. monetary policy to remain easy, resulting in what he believes should be a prolonged eight-year economic expansion (2009-2017), with a gradual rise in the Fed funds rate in late 2015 and 2016 followed by a more aggressive monetary tightening in 2017 or 2018 after the 2016 Presidential election.
