BNY Mellon Chief Economist Richard Hoey believes that several factors will come into play next year which will support a mild acceleration of GDP. Part of his assessment is based on a favorable approach to the economy by the likely next head of the Fed and a downgrade of the economic warfare on Capitol Hill.
After two years of growth at about a 3% pace, Hoey is expecting to see 2014 growth come in between 3.5% and 3.75%.
In general, Hoey says easy monetary policies in developed nations will be a key building block to the expansion.
On the likelihood that Janet Yellen will be heading up the Fed next year, Hoey predicted, “We believe that the implication of ‘Yellenomics’ is that monetary policy will be very supportive of economic expansion for the next several years.”
He also said that while there will be no major agreement between Democrats and Republicans on how best to steer the economy, the level of disagreement will be far less disruptive than this year’s government shutdown.
“We believe that the U.S. budget battles have moved from a World War II phase of rapidly moving front lines to a World War I phase of static front lines and trench warfare,” Hoey says. “Rather than some ‘grand bargain,’ we expect minor budget compromises with little policy change and substantially less disruption than in the last several years.”
Hoey cites four pillars upon which the gains will be founded: (1) past and ongoing monetary ease, (2) reduced fiscal drag, (3) moderation in the post-crisis deleveraging of the private sector and (4) moderate energy prices, given the expansion of new sources of energy supply, especially in the U.S.
RBR-TVBR observation: We always say that modest growth beats the living crap out of any kind of a setback, so this prediction can only be seen as one to add to the good news pile.