Is the U.S. Growth Slowdown Trending into a Recession?

ThinkstockPhotos-181165144Our outlook for the US economy for 2016 is for decent growth, driven by Personal Consumption, Government Consumption (finally back to contributing positively to growth after years of retrenchment) and Investments (particularly strong performance of Residential Investments, while Non-Residential Investments will face a difficult first part of the year).

Key Insights

  • We believe the probability of a U.S. recession this year is still limited and the resilience of our base case is confirmed against further stress on selected financial indicators. In particular, we expect the US consumer to be resilient and sustain growth on the back of a healthy labor market, improvements on the compensation profile, and still moderate inflation, which should support real income growth.

    GDP Growth ComponentsSource: Pioneer Investments, data as March 4, 2016. E = Estimate
    Source: Pioneer Investments, data as March 4, 2016; E = Estimate
  • Leading indicators seem to point to a tentative stabilization and improvement in growth of the US and sectors hit by the strong dollar and weak oil price.
  • We currently expect inflation to move gradually towards the Fed Target of 2%. Should the oil and commodity prices trend higher than we currently assume in our scenario, we may witness a higher than expected increase in inflation, still not priced in by the market.
  • On monetary policy, we believe that Fed will be on hold in March, and will manage market expectations carefully. A move in March would been an unwelcome surprise for financial markets, but we see this risk very limited.


To read Monica’s entire U.S. Economy Update, please click here.

About Monica Defend

Monica Defend is the Head of Global Asset Allocation Research with Pioneer. Investments in Italy. She has been working in the investments industry since 1997. She is responsible for providing asset allocation recommendations and core. investment strategies at macro, sector and national level. The Global Asset Allocation Research team is responsible for the short, medium and long-term asset. class forecast; asset class valuation; the construction and implementation of trading rules and closely monitoring the financial markets. Monica moved to the Milan office as Head of Italian Quantitative Research. Prior to that, she was a Quantitative Analyst in the Dublin office. Monica has a degree in Social and Economics Sciences from Bocconi University. She also holds a Master’s degree in Economics from Bocconi University and Master’s degree in Financial Economics from London Business School-Bocconi. She has been a member of the Unicredit Management and Banking Academy since 2004.
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