CHERRY HILL, N.J., June 18, 2015 /PRNewswire/ -- The economy
stumbled early this year, but found its footing in the spring and
appears to finally be hitting its stride according to a report
released today by TD Economics (www.td.com/economics), an affiliate
of TD Bank, America's Most Convenient Bank®.
"The winter chill is definitely gone and the economy is heating
up along with the weather," says TD Bank's Chief Economist,
Beata Caranci. "Persistent strength
in the job market and resurgence in consumer spending adds to our
confidence that the weakness in the first quarter was an
aberration. We are on track for healthy growth over the
remainder of the year."
Economic growth is expected to average 2.5% on an annual average
basis in 2015 and accelerate to 2.9% in 2016. With job growth
holding above 200,000 a month, the unemployment rate will fall from
5.5% to 5.0% by the end of 2016.
As headwinds lift, household spending will carry economic
growth
One doesn't have to look far for explanations for the lackluster
pace of growth early in the year. "Unseasonably cold weather, west
coast port disruptions, and declining investment in the oil and gas
sector all share in the blame," says Caranci.
Perhaps just as disappointing was the slowdown in consumer
spending growth. After growing by close to 4.0% (at an annualized
rate) over the second half of last year, household spending growth
fell to half this rate in the first quarter of the year. Spending
growth slowed even as households were beginning to see the benefits
of lower gasoline prices.
"Consumer spending disappointed, but must be put in context. The
saving from lower gasoline prices is small at first, but accrues
over time," says Caranci. "The longer that gasoline prices remain
low, the more likely it is that households will reallocate that
part of their budget to other goods and services, giving support to
total spending growth."
With additional support from job growth and rising wages, TD
Economics expects consumer spending growth to accelerate to 3.6%
over the second half of 2015.
Job market on track for another great year
One bright spot in the economic data over the first half of the
year has been the performance of the job market. Job growth has
averaged 217,000 a month over the first five months of the year.
This is just a shade below the 229,000 over the same period a year
ago. "Given that job growth in 2014 was the best in 15 years, this
is a really good showing," says Caranci.
The ongoing strength in job growth is important for a number of
reasons. First, it suggests that the economy is probably not as
weak as the first quarter real GDP data indicated. "Some of that
reported weakness likely reflects changing seasonal patterns that
don't appear as prominent in the labor market," says Caranci.
Second, it suggests that the Federal Reserve is still on course
to raise interest rates this year. With unemployment falling and
wages rising, key pieces are falling into place for the Federal
Reserve to begin pushing rates higher in September. "Investors will
need to dig into the recess of their memories. The last time
the Fed began a rate-hiking cycle was in 2004. So while we
believe the Fed will communicate a go-slow approach, investors
should brace themselves for volatility." says Caranci.
TD Economics expects the Federal Reserve to begin its rate
hiking cycle September and to raise rates by 50 basis points (0.5
percentage points) in each of the next two years, bringing the fed
funds rate to 1.25% by the end of 2016.
TD Economics provides analysis of global economic performance
and forecasting, and is an affiliate of TD Bank, America's Most
Convenient Bank®.
The complete findings of the TD Economics report are available
online at
http://www.td.com/document/PDF/economics/qef/qefjun2015_us.pdf
About TD Bank, America's Most Convenient
Bank®
TD Bank, America's Most Convenient Bank, is one of the 10
largest banks in the U.S., providing more than 8 million customers
with a full range of retail, small business and commercial banking
products and services at approximately 1,300 convenient locations
throughout the Northeast, Mid-Atlantic, Metro D.C., the Carolinas
and Florida. In addition, TD Bank
and its subsidiaries offer customized private banking and wealth
management services through TD Wealth®, and vehicle
financing and dealer commercial services through TD Auto Finance.
TD Bank is headquartered in Cherry Hill,
N.J. To learn more, visit www.tdbank.com. Find TD Bank on
Facebook at www.facebook.com/TDBank and on Twitter at
www.twitter.com/TDBank_US.
TD Bank, America's Most Convenient Bank, is a member of TD Bank
Group and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada, a top 10 financial services
company in North America. The
Toronto-Dominion Bank trades on the New
York and Toronto stock
exchanges under the ticker symbol "TD". To learn more, visit
www.td.com.
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SOURCE TD Bank