U-M Report: U.S. Economy to Pick Up the Pace in 2015

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The U.S. economy is expected to grow by more than 3 percent next year — its highest rate in 10 years, say economists at the University of Michigan.

"We expect that 2015 will be the year when U.S. economic growth will finally accelerate meaningfully," says Daniil Manaenkov, an economist in the U-M Department of Economics, who worked with colleague Matthew Hall on their annual forecast.

"The housing sector is on a more solid footing, and is well-positioned for growth," Manaenkov says. "The unemployment rate dipped below 6 percent and is likely to keep falling, nudging higher wage growth. The industrial capacity utilization rate is close to normal, which bodes well for investment."

The researchers project the creation of 5.3 million jobs over the next two years, making the net creation of 10.3 million jobs from 2013 through 2016 the best four-year stretch since 1997-2000.

Likewise, overall economic output growth, as measured by real GDP, will jump from 2.2 percent this year to 3.1 percent in 2015, and 3.3 percent in 2016.

Despite rising mortgage rates that are expected to hit 5 percent by the end of 2016, the forecast also calls for a "a housing market poised to continue its long recovery from the depths of recession."

Construction of new homes, both single-family and multi-unit housing, will continue to rise from a million units this year to more than 1.2 million next year and nearly 1.5 million in 2016. Sales of existing single-family homes are expected to increase from less than 4.4 million this year to nearly 4.7 million in 2015, and about 4.8 million in 2016.

Sales of light vehicles will continue their upward trend from 16.3 million units sold this year to 16.6 million in 2015, and 17 million the year after. What's more, gas prices should remain relatively stable as the price of oil holds steady around $79-$80 per barrel through 2016.

"Despite the change in Senate control (by Republicans), fresh rounds of harsh fiscal austerity are unlikely," Manaenkov says. "And in spite of the projected start of interest rate tightening in 2015, the overall monetary policy stance is likely to remain loose for the duration of our forecast."

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