In early January of this year, many experts agreed that 2016 will not be a strong year for the U.S. economy. These predictions were mainly tied to the slight increase of the gross domestic product (GDP) of just 0.7% in Q4 of 2015. However, there has been some revised data as of March this year showing that the GDP increased at a rate of 1% in the Q4. Now, although this increase is still below the 2% expansion we’ve noticed in Q3 of 2015, GDP suffered because of the volatility in the markets in the end of 2015 and beginning of 2016.
So, what should you expect of the US economy in Q1 2016?
The prediction is that consumer spending will account for the majority of growth for GDP in Q1 of 2016. The expected growth may vary, however is expected to be between 2.3% to 2.9%. The predictions are linked with the pickup in income and consumption as seen in January, which has driven strength to the economic fundamentals as the year of 2016 advances. Additionally, aside from energy, the inventories and exports of goods in 2015’s last quartile were about 2.3%, which is a positive indicator that 2016 should be a year of recovery for energy and inventories. The suggested second half of 2016 will be much stronger than the first half we are actively experiencing, mainly because of the current pullback in energy and inventory.
According to Kiplinger, the focus in energy will remain with crude oil, which should be trading from $35 to $40 per barrel through May, and the construction and sales of single family homes will be up for nearly 15% in 2016. These two are healthy enough factors and potential indicators of a solid rise of the US economy in 2016. However, economists also keep in mind the influence of the inflation, which is a factor to be expected every year, notwithstanding the expected growth in 2016. The core inflation which excludes food and energy, is expected to rise about 2.3% this year, which is 0.2% more than the one posted for 2015.
Additionally, manufacturing and capital goods are factors that seem to remain stagnant. Moreover, capital goods received new orders in January triggering a bounce of 3.9% in January. However, manufacturing is no longer among the strongest sectors in the US economy anymore, which leads us to believe that without change, it may not act as a major economic driver in the near future.
These are just a few factors to keep in mind while making your own predictions about the U.S. economy, however, most models point to low or moderate growth.