Thursday, December 31, 2015

Goldman Forecast: "Questions for 2016"

by Bill McBride on 12/31/2015 02:51:00 PM

Here are a few excerpts from a piece by Goldman Sachs economists Jan Hatzius and Zach Pandl: "8 Questions for 2016"

On GDP Growth:

We forecast that growth will improve only slightly from its current pace, averaging 2.25% next year.
On Housing:
[W]e see a strong case for a continued recovery in housing starts from about 1.2 million currently to 1.4-1.5 million over the next few years—even without a major easing in lending standards or a rebound in the headship rate of young adults ... we expect that 2016 will mark the end of the post-crisis housing market in several respects. We forecast that the rebound in house prices will slow, that single-family construction will account for a rising share of new housing starts, and that the homeownership rate will finally stabilize.
On Fed hikes:
[A] standard policy rule coupled with the Fed's economic projections (or our own) calls for a roughly 125bp increase in the funds rate by end-2016. While the FOMC's preference for a "gradual" path of hikes suggests that four is most likely, the economic case for the full 100bp implied by the Summary of Economic Projections (SEP) is strong.