US: Growth supported by solid housing and robust consumer spending – Danske Bank

Research Team at Danske Bank, suggests that the global economy surprised to the downside in 2015 and early 2016 as the US was pulled down by another drop in oil prices that put the economy at the brink of a new recession.

Key Quotes

“Oil investment collapsed, banks started tightening credit standards and high yield spreads blew out. However, it seems that the worse may be over for the US economy and we forecast a gradual recovery from growth below 1% in Q1 to 2-2½% growth from Q2-Q4. Oil prices have increased lately from below USD30 per barrel to around USD50 per barrel. And energy investments can hardly fall further after the sharp drop last year.

Consumption growth have generally held up well in the US and kept the economy from slipping into recession. Recent weakness in the labour market has been raised as a rising recession risk. But it is in our view more an effect of the past slowdown in the US economy rather than a predictor of where US is heading. Very solid housing data and robust consumer spending is likely to keep US afloat around cruising speed rest of the year as the energy drag fades.”