PHP Authors: Liz McMillan, Carmen Gonzalez, Hovhannes Avoyan, Lori MacVittie, Trevor Parsons

News Feed Item

Goodbye, Desolation: U.S. Economy Poised for Blockbuster 2014

Bank of the West Chief Economist Sees U.S. Consumer Finally Driving Recovery

SAN FRANCISCO, Dec. 12, 2013 /PRNewswire/ -- For the first time in more than six years consumer spending will lead U.S. economic growth as we enter 2014, Bank of the West Chief Economist Scott Anderson, PhD, said during his 2014 Economic Outlook press briefing today. Strong exports, capital spending and a recovery in government spending will also contribute to robust 2014 economic growth of 3.0% Q4/Q4.

(Logo:  http://photos.prnewswire.com/prnh/20120418/MM90603LOGO)

"We are, at last, leaving the desolation of the Great Recession," said Anderson, who is currently ranked the fourth best economic forecaster of U.S. GDP by Bloomberg News over the past two years. "Prospects for the U.S. economy are particularly bright for 2014, as all major sectors of the economy will contribute to U.S. growth.  Job creation is finally accelerating as confidence among businesses large and small has returned, wealth gains are robust, exports are rising and drag from sequestration and Washington in-fighting is set to diminish."

Anderson's 2014 Economic Outlook projects U.S. unemployment to decline steadily through 2014 to 6.6% and potentially create the first challenge for incoming Fed Chairwoman Janet Yellen: how to manage interest rates in the face of a rapidly falling unemployment rate and stronger job growth.

"The Fed's unemployment threshold of 6.5% for raising rates will be tested in 2014," Anderson said. "Although strong economic growth might seem like a nice problem to have, Janet Yellen will have to manage the market's interest rate expectations carefully by either strengthening forward guidance, for example lowering the Fed's unemployment threshold to 6.0% early in 2014, or telegraphing a tightening cycle sooner than anticipated on stronger employment and economic growth."

Anderson's Key Sector Growth Observations

The Consumer as Bellwether – With consumer deleveraging in the rear-view mirror and debt-service burdens at record lows, there will be fewer constraints on borrowing and spending.  As 2.6 million new jobs are added and unemployment continues to decline, banks will become more willing to lend to consumers and consumer credit will expand. 

Better real income gains will be a result of several factors, including: no payroll tax hike in 2014, steady low inflation and nominal wage gains in a tightening labor market – and, in some cases, wages being bid up for highly skilled workers in short supply. 

"As real income gains continue to recover, real income growth at these rates should easily support real consumer spending of 2.6 percent in 2014 – a 30 percent improvement over 2013," said Anderson.

Consumers will also benefit from 2013's strong tailwind in wealth gains. Household wealth is more than fully recovered from the Great Recession and it is estimated that every additional dollar of household wealth will lift consumer spending between three and five cents over the next two years.

Capital Spending Improvement – Taking cues from the consumer, business confidence and small business spending will be on the mend.

U.S. Manufacturing and Export Revival – U.S. exports will see the best growth since 2011, and U.S. manufacturers are performing better than the overall economy. Industrial production growth has been far stronger during this economic expansion than the early 2000's.  The U.S. is also benefiting from higher productivity and lower energy prices, making U.S. manufacturers more globally competitive.  In 2014, the demand for U.S. exports will increasingly originate from Europe, developing Asia and parts of Latin America, rather than the BRIC economies.

Return in Government Spending – The austerity of government spending in recent years is expected to diminish. State and local governments are beginning to spend more as tax revenue improves. Neither another federal government shutdown nor a crisis over the federal debt ceiling is projected to occur in Washington D.C. And there could be a surprising benefit as federal spending constraints are eased.

Housing Market Recovery Remains Intact, with Caveats – The housing market recovery will continue, although housing affordability and rising mortgage rates will remain a headwind in 2014 as the Federal Reserve Board ends quantitative easing.  After a 17.5% gain in 2013, housing starts will rise 12.3% in 2014. Home price appreciation will slow sharply on higher interest rates.  Housing affordability will be a bigger constraint particularly in high-priced markets like those along the coastal regions of California, while marginal buyers will be forced into lower-priced homes.

The Fed Begins to Unwind with January Taper and Strengthens Forward Guidance – The Federal Reserve Board's extraordinary monetary accommodations will begin to end, as it begins to tapers its quantitative easing policy in January and ends by Fall, 2014. At the same time, Anderson expects the Fed to strengthen its forward guidance on the Fed funds rate, ensuring that short-term interest rates remain near zero perhaps into 2016.

Despite his optimism, Anderson also shared factors that could slow the U.S. recovery in 2014:

  • An Ineffective Government – Political discord in Washington over government spending or the debt ceiling could weigh on consumer and business confidence, eventually leading to panic by Treasury bond investors which could trigger a rise in interest rates, a weaker dollar and a substantial sell-off of stocks.
  • Federal Reserve Growth Strategy – Actions by the Federal Reserve to end the third cycle of quantitative easing could create an unexpectedly large uptick in long-term interest rates that would negatively impact the housing market, business spending and purchases of durable goods like autos.
  • Emerging Market Instability – Capital outflows and financial instability could hit the economies of emerging markets, which in turn would exacerbate Europe's debt and banking problems. A contraction in Europe could reignite a banking crisis.
  • Geopolitical Discord – Middle Eastern and East Asian geopolitical differences could escalate into armed conflict, which could also derail economic expansion in the U.S.

Anderson's slides and audio can be accessed here: https://botw.webex.com/botw/lsr.php?AT=pb&SP=EC&rID=67889488&rKey=11a45ed90874cf95

About Bank of the West:
Founded in 1874, $65 billion-asset Bank of the West (www.bankofthewest.com), member FDIC and equal housing lender, offers a wide range of personal, commercial, wealth management and international banking services. The bank operates more than 600 retail and commercial banking locations in 19 Western and Midwestern states. Bank of the West is a subsidiary of BNP Paribas, which has a presence in 80 countries with nearly 200,000 employees.

For more information on Anderson's 2014 U.S. Outlook, to be added to his distribution list or to request an interview, please contact Bank of the West Corporate Communications.

SOURCE Bank of the West

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

IoT & Smart Cities Stories
Digital Transformation and Disruption, Amazon Style - What You Can Learn. Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 25+ years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to ...
DXWorldEXPO LLC announced today that Big Data Federation to Exhibit at the 22nd International CloudEXPO, colocated with DevOpsSUMMIT and DXWorldEXPO, November 12-13, 2018 in New York City. Big Data Federation, Inc. develops and applies artificial intelligence to predict financial and economic events that matter. The company uncovers patterns and precise drivers of performance and outcomes with the aid of machine-learning algorithms, big data, and fundamental analysis. Their products are deployed...
Dynatrace is an application performance management software company with products for the information technology departments and digital business owners of medium and large businesses. Building the Future of Monitoring with Artificial Intelligence. Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more busine...
The challenges of aggregating data from consumer-oriented devices, such as wearable technologies and smart thermostats, are fairly well-understood. However, there are a new set of challenges for IoT devices that generate megabytes or gigabytes of data per second. Certainly, the infrastructure will have to change, as those volumes of data will likely overwhelm the available bandwidth for aggregating the data into a central repository. Ochandarena discusses a whole new way to think about your next...
CloudEXPO | DevOpsSUMMIT | DXWorldEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
All in Mobile is a place where we continually maximize their impact by fostering understanding, empathy, insights, creativity and joy. They believe that a truly useful and desirable mobile app doesn't need the brightest idea or the most advanced technology. A great product begins with understanding people. It's easy to think that customers will love your app, but can you justify it? They make sure your final app is something that users truly want and need. The only way to do this is by ...
Cell networks have the advantage of long-range communications, reaching an estimated 90% of the world. But cell networks such as 2G, 3G and LTE consume lots of power and were designed for connecting people. They are not optimized for low- or battery-powered devices or for IoT applications with infrequently transmitted data. Cell IoT modules that support narrow-band IoT and 4G cell networks will enable cell connectivity, device management, and app enablement for low-power wide-area network IoT. B...
The hierarchical architecture that distributes "compute" within the network specially at the edge can enable new services by harnessing emerging technologies. But Edge-Compute comes at increased cost that needs to be managed and potentially augmented by creative architecture solutions as there will always a catching-up with the capacity demands. Processing power in smartphones has enhanced YoY and there is increasingly spare compute capacity that can be potentially pooled. Uber has successfully ...
SYS-CON Events announced today that CrowdReviews.com has been named “Media Sponsor” of SYS-CON's 22nd International Cloud Expo, which will take place on June 5–7, 2018, at the Javits Center in New York City, NY. CrowdReviews.com is a transparent online platform for determining which products and services are the best based on the opinion of the crowd. The crowd consists of Internet users that have experienced products and services first-hand and have an interest in letting other potential buye...
When talking IoT we often focus on the devices, the sensors, the hardware itself. The new smart appliances, the new smart or self-driving cars (which are amalgamations of many ‘things'). When we are looking at the world of IoT, we should take a step back, look at the big picture. What value are these devices providing. IoT is not about the devices, its about the data consumed and generated. The devices are tools, mechanisms, conduits. This paper discusses the considerations when dealing with the...