Outlook positive for US economy

Posted by MarkL on January 4, 2015

 This year could be the year the US economy finally shrugs off the remnants of the Global Financial Crisis and starts to act like the world’s largest economy.

As 2014 closed and the new year began the signs were looking good for the US, with low inflation, cheap money, rising house prices, a growing job market and plenty of oil and gas.

Last year was a good one for the job market and as of November the US had already enjoyed its biggest year of employment growth since 1999.  It is well placed to continue in to this year.

The residential property market in the big centers regained the ground lost in the GFC and prices are back or above where they were in 2008 in most cities.

Wall Street, where much of the GFC woes began, enjoyed a solid end to the year and the bear has turned back in to the bull.

The price of oil has almost halved since the middle of the year. In June the spot price for crude oil was US$110 a barrel, now it is sitting around $60. A reduction in demand from China and Europe along with OPEC’s decision not to cut back on demand have been factors in the drop.

America is about to become a major player in the energy business again with some experts predicting it will become the largest producer of oil in the world.

While the signs are certainly good, there could be a few downsides.

Last week the Wall Street Journal predicted Janet Yellen, the Federal Reserve Chairwoman might do something that hasn’t been done since 2009 – raise interest rates. The paper predicted it would be around June and did not indicate by how much, but did add the timing and the amount would be crucial so as to not panic investors.

Yellen will also need to keep a strict eye on inflation, the great wrecker of booms. However she said in her final press conference of 2014 she expected falling oil prices in 2015 to ease pressure on inflation and she was confident it could be kept at 2 per cent.

She also predicted in that address the strengthening job market would help the property market continue to grow in to 2015.

While the picture is generally rosy for the US economy it will take some clever managing by the Fed. The American economy could be about to enjoy one of its best years in a long time.