Unemployment is down, the gradual recovery continues, there is no expectation of high inflation, yet the economy is unlikely to boom.
At least that was the outlook of a panel of analysts and economists in Manhattan on Thursday.
“The economy is sluggish and there are no signs of inflation,” Barbara Reinhard, chief investment officer for Private Banking Americas, Credit Suisse, said at FPA/New York’s Spring Forum.
A slow recovery should continue the rest of the year, in part because both consumers and companies are spending “cautiously,” said Milton Ezrati, senior economist at Lord Abbett.
He said he “was amazed” at how the American consumer was not spending most of the windfall received through sharply declining gas prices, which he said amounted to a 4 percent after tax cut for every American.
Ezrati said the “sub-standard” recovery is likely to continue over the rest of 2015.
“The consumer and the corporate sector are both being remarkable cautious,” he said. Giving the history of the American consumer’s spending in previous recoveries, Ezrat said, “I feel like I’m in a foreign country.”
The saving, he added, is slowing the recovery. Nevertheless, he said the slow recovery showed no signs of sliding into a recession.
That may be because money will remain relatively cheap, said Neal Soss, vice chairman of Research for Credit Suisse.
Soss argued that the central bank will raise rates, but very gradually. The Federal Reserve will “tighten but will still be accommodative,” he said.
Credit Suisse is projecting rates will only rise from around zero by 175 basis points over the next year and a half.
The market, Ezrat added, is “fairly priced.” It has, he said “an enormous cushion of value.”