NGDP Outlook

The last quarter ended badly for our NGDP Forecast, with nominal growth in 2015Q3 forecasted at 3.4%. Tight money toward the end of the Fed’s “QE3” easing program has seriously weighed on the growth outlook. The 10% rise in the USD Index against major currencies, the 10% drop in the S&P and the fall in the oil price during September have all taken their toll on our market-led forecast. The roll into our 2015Q4 forecast shows NGDP growth one year ahead back at nearly 3.8%. The jump is mostly from the higher growth rate seen in the 2014Q2 NGDP growth rate figure…...

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Q2 2014 was a similarly quite quarter for our US NGDP Forecast. Like last quarter the roll into the new quarter has resulted in a small drop in expected NGDP growth, now forecast at 3.6% growth. The economy continues to grow very slowly, with this being the slowest recovery on record....

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An uneventful quarter for markets meant an uneventful quarter for our NGDP Forecast. The new, lower level, of growth reflects markets beginning to worry more about the end of QE3 and what might happen afterwards – but the change is small, just 3.8% to 3.7%....

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We now expect 3.8% YoY growth 12 months ahead in 1Q 2015. This poor rate of growth but enough to see the unemployment rate continue to fall but not enough to see healthy nominal or real wage growth. The endlessly discussed ending of QE3 will continue to keep a lid on growth rates....

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