The US is decisively in a growth rate cycle upturn, which began last year just after the Presidential election.
Very savvy BCA Research Chief Economist Martin Barnes and ECRI Co-founder Lakshman Achuthan provided an outlook of the US economy that surely contradicts the consensus sentiment of many economists.
Mr. Barnes, speaking at Mauldin Economics’ SIC 2017, pointed out that while the post-2008 expansion has been painfully slow, if it lasts for another 2 years, it will hit the all-time record.
He also pointed out that the US isn’t falling prey to the typical imbalances you would expect in a long cycle.
“Importantly, inflation has been subdued, and inflation is a typical characteristic of late-cycle,” he said, adding: “We won’t get back to 5–6% interest rates. Maybe 3%, but we’re a long way from that.
No Recessionary Alarm Bells
Mr. Barnes noted that auto, housing, and business investments tend to slow down ahead of a recession, and he does not see any alarm bells ringing in those sectors.
“The economy has grown at the rate you’d naturally expect it to grow at,” he concluded. “I don’t worry about the near-term prospects of the economy. We’re going to putz along at about a 2% growth rate.”
Taking the reins from Mr. Barnes, ECRI Co-founder Lakshman Achuthan echoed his largely positive, sanguine outlook.
Providing a dose of perspective, he noted that the Western economy experienced a breathtakingly quick rise, but that its position on top is an exception in the longer history of global GDP.
According to the ECRI’s analysis, the US is decisively in a growth rate cycle upturn, which began last year, Mr. Achuthan said, adding: “There is no recession in sight this year.”
However, he did warn that manufacturing data, a leading growth indicator, is now pointing to a new downturn in growth.
Mr. Achuthan wrapped up a mainly positive and insightful presentation at the SIC 2017 by saying that the cyclical outlook hasn’t been this good in years, but investors should be aware that a global industrial downturn may be on the horizon as part of the normal cycle.