Bank Economists See Rebound from First-Quarter ‘Shock’

The U.S. economy will bounce back from a lackluster start to the year, with growth in the second half of 2015 forecasted to reach 2.8, the ABA Economic Advisory Committee said today. “This has been a wild period for the economy,” said EAC Chairman Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, referring to the seasonal “shock” of bad weather in addition to sharp drops in oil prices and the West Coast port strike.

The committee of 16 chief economists at some of the nation’s largest banks expected much of this temporary data to turn, with year-end energy prices as a net positive, predicted job growth of 200,000 per month or higher and a drop in the unemployment rate to a full employment level by the end of 2016. The EAC was also optimistic about credit creation, attributing lingering concerns about small business credit availability to demand. “I don’t think the entrepreneurial spirit in the U.S. has died,” said Harris.

Most committee members expected the Federal Reserve to maintain near-zero interest rates until the fourth quarter, with four members forecasting the first rate rise at the Federal Open Market Committee’s September meeting. “The Fed is ready to move once the data show clearly that the weak first quarter was an aberration,” said Harris, adding that the Fed’s change in its forward guidance to a “data-dependent” approach was an “important signal” for raising rates.