Macroeconomic and Investment Research
10 Macroeconomic Forecasts for 2016 10 Macroeconomic Forecasts for 2016 January 2016
Overview 1.
El Ni単o Will Boost U.S. GDP Growth
2.
The U.S. Unemployment Rate Will Approach 4 Percent
3.
U.S. Headline CPI Will Jump Due to Base Effects
4.
Net Issuance of U.S. Treasury Notes and Bonds Will Fall by $200 Billion
5.
U.S. New Home Construction Will Increase
6.
Tighter Labor Market Will Spur Wage Growth
7.
Diverging Monetary Policies Will Drive Further Dollar Appreciation
8.
The Euro Zone Recovery Will Continue to Strengthen
9.
China Will Weaken the RMB to Support Growth
10. World Oil Supply/Demand Will Move Closer to Balance
2
El Niño Will Boost U.S. GDP Growth U.S. Personal Consumption Expenditures Contribution to GDP Growth Rises During Strong El Niños (1950-Present) PCE Contribution to Real GDP Growth (QoQ SAAR) 15%
Strong El Niño (Avg.=4.1%)
10% La Niña (Avg.=2.4%)
Normal (Avg.=1.8%)
Mild El Niño (Avg.=2.0%)
-0.5
0.5
5%
0%
-5%
-10% -2
-1.5
-1
0
1
1.5
2
2.5
NOAA Oceanic Niño Index (>0.5 defined as El Niño; <-0.5 defined as La Niña) Source: NOAA, Haver Analytics, Bloomberg, Guggenheim Investments. Data as of 3Q2015.
3
The U.S. Unemployment Rate Will Approach 4 Percent Elevated Job Openings Portend Further Declines in the Unemployment Rate Unemployment Rate (LHS, Four-Month Lag)
Job Openings Rate (RHS)
11%
1.4%
10%
1.8%
9% 2.2% 8% 2.6% 7% 3.0% 6%
3.4%
5%
4% 2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3.8%
Source: Bloomberg, Guggenheim Investments. Data as of 11.30.2015. Note: shading area highlights recession.
4
U.S. Headline CPI Will Jump Due to Base Effects Headline CPI (YoY%) Is Set to Rise Under Various Oil Price Scenarios $30
$40
$50
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
2012
2013
2014
2015
2016
Source: Bloomberg, Guggenheim Investments. Data as of 12.31.2015. Note: Projection assumes constant core CPI of 2.0 percent.
5
Net Issuance of U.S. Treasury Notes and Bonds Will Fall by $200 Billion Treasury Will Cut Note Issuance to Make Room for Increased Bill Supply Of Which Purchased by the Fed
Net Issuance of U.S.T Notes & Bonds
Forecast
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
-$200 2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Guggenheim Investments, Haver Analytics, U.S. Treasury, Federal Reserve. Note: in USD billions. Excludes net issuance of T-bills.
6
U.S. New Home Construction Will Increase Rising Household Formation Supports a Pickup in New Home Construction Two-Year Change in Total Households, 24-Month Moving Avg. (LHS)
Housing Starts, 24-Month Moving Avg. (RHS)
3400K
2100K
1900K 2900K 1700K
1500K
2400K
1300K
1900K
1100K
900K
1400K 700K
900K 1980
1985
1990
1995
2000
2005
2010
2015
500K
Source: Haver Analytics, Guggenheim Investments. Data as of 12.31.2015.
7
Tighter Labor Market Will Spur Wage Growth Average Hourly Earnings Are Set to Accelerate as Slack Diminishes Unemployment Gap (Inverted, LHS)
Average Hourly Earnings, YoY% Change (RHS)
-2%
4.5%
-1%
4.0%
0%
3.5%
1%
3.0%
2%
2.5%
3%
2.0%
4%
1.5%
5% 1985
1990
1995
2000
2005
2010
2015
1.0%
Source: Haver Analytics, Guggenheim Investments. Data as of 12.31.2015. Note: Unemployment Gap is defined as the U3 unemployment rate minus the CBOâ&#x20AC;&#x2122;s NAIRU estimate.
8
Diverging Monetary Policies Will Drive Further Dollar Appreciation Two-Year Yield Differentials Tend to Drive EUR/USD Two-Year Treasury-Bund Spread (LHS)
EUR/USD (Inverted, RHS)
200
1
150 1.1 100 1.2 50
0
1.3
-50 1.4 -100 1.5 -150
-200
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1.6
Source: Haver Analytics, Bloomberg, Guggenheim Investments. Data as of 12.31.2015.
9
The Euro Zone Recovery Will Continue to Strengthen European Central Bank Action Will Support the Euro Zone Economy Euro Zone Real GDP (%YoY) (LHS)
Composite Output PMI (RHS)
3.0%
60
2.5%
58
2.0% 56 1.5% 54 1.0% 52 0.5% 50 0.0% 48 -0.5%
46
-1.0%
-1.5% Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
44
Source: Bloomberg, Guggenheim Investments. Data as of 12.31.2015.
10
China Will Weaken the RMB to Support Growth The Chinese Currency Has Continued to Strengthen Even as Growth Has Downshifted GDP YoY (LHS)
RMB Real Effective Exchange Rate (RHS)
15%
2010=100 135 130
14%
125 13% 120
12% 115 11%
110
10%
105 100
9% 95 8% 90 7%
6% 2001
85 80 2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Haver Analytics, Guggenheim Investments. Data as of 4Q2015.
11
World Oil Supply / Demand Will Move Closer to Balance Demand Growth Outpacing Supply Growth Will Help Rebalance the World Oil Market in 2H2016 mb/d
World Oil Market Balance
Forecast
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: IHS, Guggenheim Investments. Data as of 12.31.2015.
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