Another year of solid US GDP growth

2015 has seen a second successive year of above-trend economic growth. Nevertheless, growth has been less than initially forecast, partly because of cutbacks in oil investment and production, and partly because of the negative impact of a strong dollar and weak foreign demand on exports. 

For 2016 slightly stronger GDP growth of 2.8% is expected, compared with around 2.4% in 2015. This reflects a number of drivers. First, the factors mentioned above will probably be slightly less of a restraint in 2016. Second, the impact of fiscal policy will be neutral to positive. Third, the fundamentals for domestic demand, particularly consumer spending, remain positive. 

Although uncertainty surrounds how the economy will respond to interest rate increases, the expected small rises should not be a major constraint. The bottom line is that economic growth is expected to remain above trend, which points to further falls in the unemployment rate and a further decline in the amount of spare capacity in the economy.