The strong U.S. dollar will start to hinder growth in the country, say analysts at Nomura in their Global Economic Outlook Monthly report. They expect the U.S. economy to grow below 3% in 2015, and eventually around 2% in 2016. “Although some of these near-term shocks will likely dissipate, we now believe the stronger dollar will have a notable negative impact on growth through trade in 2015,” they say. “In addition, we believe that there is still some way to go before the oil and gas rig count reaches its nadir, which should produce a further drag on business capex in the first half of the year before starting to rebound in late 2015.” The analysts point out that the lower oil price hasn’t spurred consumer spending, but rather pushed up the savings rate. However, they say that “there should be some offset from stronger consumption growth through 2015, as we expect the consumer to spend some of the extra money saved from declining gasoline prices.” Looking to employment, the analysts say they expect monthly job gains north of 200,000 this year, which would likely push the unemployment rate down to 5.2% by year end. They also expect inflation to move into positive territory this year, and accelerate in Q2. Commenting on Fed policy, they expect the first rate hike to occur in September. “After the first rate hike, we expect the FOMC to hike at a pace of 25bp per quarter.”
