US economic outlook for 2016

The previous year ended with lower growth due to the larger-than-expected inventory adjustment and weak net-exports, but domestic spending by households, businesses and governments have also decelerated. Due to the unfavourable economic indicators, fourth quarter real GDP growth came to just 0.6% annualized from 2.0% previously.

Moreover, labour market growth has maintained momentum and in combination with weak inflation, it has led to stronger real income growth that will sustain domestic demand in the 3% range in 2016. The economy is expected to grow at a modestly above-trend rate in current year, allowing the Federal Reserve to continue gradually normalizing monetary policy.