MHI Solutions - Volume 3, Issue 2 - (Page 85)

ECONOMIC MARKET ANAlySIS U.S. Growth to Remain Positive in 2015, While Risks to Growth in Europe and China Remain By JASON SCHENKER, PRESTIGE ECONOMICS O ur economic expectations have not changed in the past quarter; we still expect solid U.S. economic growth in 2015. This growth is likely to be accompanied by downside risks to global growth, benign materials costs that rise later in the year, and volatile foreign exchange markets. While we previously acknowledged elevated risks to global growth in the first half of 2015, we still expect improvements later in the year. Additionally, outside of the energy space, most corporations are poised for continued expansion, although interest rates and labor costs are poised to rise on trend, with material costs likely to rise later in the year. 2015 should be a good year domestically, and it should be a good year for material handling, logistics and supply chain industries. Central bank policy expectations In light of a tightening domestic labor market, the Fed is poised to gradually tighten U.S. monetary policy by raising the Fed Funds Rate in 2015, although U.S. consumer inflation is poised to remain extremely low. As such, we expect only modest rate hikes in 2015, representing a very gradual, measured economic dependent Fed policy. Although an increase in the Fed Funds Rate would make capital at LIBOR-plus rates more expensive, we still fundamentally expect that growth will continue to improve domestically, and rate hikes will be modest. As such, we see at least two years of solid U.S. growth ahead. Abroad, the outlook for central banks is very dovish and accommodative. In light of increased risks to global growth, we expect that most foreign central banks will remain highly accommodative throughout 2015, while the Fed is more likely to gradually removes accommodation. As the U.S. and global economy improve, we expect more aggressive Fed Funds Rate targets in 2016 and 2017. Industrial metal prices In light of recent Chinese and European data, we are maintaining a bifurcated outlook for growth in China and Europe. Furthermore, in light of these mixed growth dynamics, we are also maintaining a bifurcated outlook for most industrial commodities and oil prices: we expect prices in the second half of 2015 and in 2016 will be higher than at the beginning of 2015. U.S. manufacturers could benefit in the immediate term from low industrial metals prices, oil prices, and natural gas prices. Prices may not remain permanently low, however, and commodity prices are poised to rise with improvements in global growth. High foreign exchange risks Last quarter, we highlighted the significance of foreign exchange risks, and these risks have risen even higher in recent months, and foreign exchange rate volatility is poised to remain high. The dollar is likely to remain strong against foreign currencies, until there is a change in perception about Fed policy or foreign growth. Weakness in Eurozone growth could weigh on China and other emerging markets (and * MHI SolutIonS 85

Table of Contents for the Digital Edition of MHI Solutions - Volume 3, Issue 2

CEO Update
Wearable and Mobile Technologies
The Rise of Automation and Robotics in Supply Chains
Disruptive Technology
The Power of the Cloud
Connections between Education, Industry Key to Training the Workforce of the Future
The Food and Beverage Industry
ProMat 2015 Preview
2015 MHI Innovation Awards to be Awarded During ProMat
Industry Trends
Economic Market Analysis
Collaborate With Supply Chain Management Programs to Solve the Workforce Shortage
Safer Handling
MHI Solution and Product Groups—Moving Forward
Solution Group Update
Solutions Spotlight
Roadmap Update
Where Are They Now
MHI News
Index of Advertisers

MHI Solutions - Volume 3, Issue 2