US to Dodge Recession, Grow by 2%, Analysts Say
This story appears in the April 4 print edition of Transport Topics.
COLUMBUS, Ind. — The U.S. economy probably will avoid recession and keep chugging along at about 2% annual growth, analysts said.
Despite a sluggish fourth quarter to end 2015 and a stock market tumble at the start of this year, two economists and a stock analyst said the economy is solid, and there is no obvious catastrophe lurking.
Economist Jim Meil compared the business cycle with the four seasons and said now it is probably in its “autumn.”
“The characteristics of the late cycle are at work now,” Meil said at the ACT Research Co. seminar here March 30. Autumns feature tight credit, earnings under pressure, fat inventories and moderate growth, he said.
Meil, ACT’s principal industry analyst, said a danger sign to look for is a flat yield curve, where 10-year Treasury notes and 90-day Treasury bills pay similar rates. When that happens, a recession often starts within one to two years, he said.
Currently, the spread is more than 1.5 percentage points.
Automobiles and construction, other than oil and gas exploration, are doing well now, Meil said, and those sectors usually provide a lot of truck freight. A problem with late-cycle economies, though, is that most durable goods manufacturers are especially sensitive to changes in gross domestic product.
A little growth is good for makers of furniture, wood products, machinery and other durables, but a contraction in gross domestic product wounds them seriously.
“They’re very, very sensitive,” Meil said.
U.S. GDP grew by just 1.4% during the fourth quarter but by 2.4% for all of 2015, the Commerce Department reported.
The expansion since June 2009, when the recession hit bottom, has been going on for 81 months now, which also is the average length of an economic recovery since 1960, Meil said, adding that the slow growth in recent years might prolong the expansion.
“I think the [tepid growth] should extend the duration of the cycle. It has contained inflation and lessened the volatility of GDP,” he said.
