Reasons for Optimism in 2015
Earlier this week I presented at TRENDS Annual Nonprofit Forecast and Risk Review at the University Club in D.C. (download my presentation slides here). The event focused on risk management strategies for 2015 and a review of association executive plans and sentiment. I joined speakers from the Nonprofit Risk Management Center and ORI.
As I noted to the audience of COOs and CFOs, I see no indication of an imminent U.S. recession. In the last three quarters, most of the growth has come from consumers and business investment. One very positive development is that oil prices have dropped sharply since June and are likely to remain low through 2015. This is equivalent to a tax cut for consumers and should boost spending.
Other encouraging factors in the outlook for next year are job growth–driven consumer spending, strong investment in equipment and structures, and a recovery in housing investment. Recreational equipment should be a major spending growth area; I anticipate a strong advancement in recreational vehicles, information processing equipment, and software.
Net exports, however, will be a negative contribution to growth until 2019. The manufacturing trade deficit became more negative this year.
Key geopolitical risks to the outlook come from outside our borders, including:
- China’s banking crisis
- Deflation in the Eurozone
- Threats to oil supplies in the Middle East
- Escalation of the crisis in Ukraine and sanctions on Russia
- Land disputes among China, Japan, Korea, and Vietnam
- Iraq and ISIS
Traditional (non-high-tech) U.S. manufacturing is not recovered from the recession but should achieve a full recovery in the third quarter of next year. The manufacturing sector will continue to grow faster than the overall economy through 2016. Globally, manufacturing growth is mixed. The purchasing managers indexes are strongest in the U.S., Canada, Mexico, the UK, and India; the Eurozone and China are near recession; and Brazil and Korea have already entered recessions.