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Standish: US economy to resume expansion as Eurozone performs better than expected

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Standish: US economy to resume expansion as Eurozone performs better than expected

Expect further easing by ECB.

Fixed income investment boutique Standish Mellon is anticipating a quick end to the soft patch in U.S. economic growth and an increase in the annual rate of real gross domestic product growth to between 2.5% and 3.0%in the second quarter of 2014.

In a recent report, Standish cites the harsh winter weather for holding U.S. growth in the first quarter to an anemic annual rate of 0.1%.  A recent increase in hiring, though, is expected to boost consumer spending, helping to lift growth, the report said.

Overall, Standish retained its forecast for global GDP at 3.5% for 2014 and 3.7% for 2015.

In the eurozone, purchasing managers' surveys indicate an ongoing expansion.

"Economic growth has surprised to the upside despite a slowdown in the broader global economy, suggesting that the risk that Europe will relapse in recession is low," said Thomas D. Higgins, chief economist and chief global strategist for Standish.  However, he added, "Public and private deleveraging across the periphery economies including Spain, Italy, Portugal will restrain growth."

Standish expects further easing from the European Central Bank as its inflation forecast still appears too high and will need to be adjusted.  Such policies would continue to put downward pressure on the euro, the report said.

"Economic growth has surprised to the upside despite a slowdown in the broader global economy, suggesting that the risk that Europe will relapse in recession is low."Looking at Japan, Standish notes this spring marks the first widespread increases in wage growth in over a decade. 

"It remains to be seen if wage growth will be sufficiently robust to prevent the erosion of purchasing power in a higher tax and inflation environment, but the key metrics are moving in the right direction," Higgins said.  Standish forecasts GDP growth at one percent in Japan for both 2014 and 2015. 

In the United Kingdom, the expansion appears to be driven by both manufacturing and services, with GDP growing 2.7% in 2014 and 2.5%in 2015, Standish said.   "We expect GDP growth to slow during 2014 as the U.K. economy transitions from a relatively fast-paced recovery to a more sustainable rate of growth," Higgins said.

While Standish expects China's GDP growth to slow from 7.2% in 2014 to 7.0% in 2015, it noted that fiscal and monetary policies should prevent a sustained loss in economic momentum. 

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In Latin America, Standish is forecasting GDP growth of 2.5% in 2014 and 3.2%  in 2015.   Economic activity in the region should accelerate as it benefits from the recovering economy in the U.S., the report said.

 

 

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