US growth hiccup temporary

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US economic growth will resume its acceleration after the temporary sharp slowdown in the first quarter, paving the way for the US Federal Reserve to raise its interest rates in the autumn, Candriam Investors Group said in its latest Economic Outlook.

Anton Brender, Chief Economist at Candriam, said: “Our forecast for the US economy is still optimistic. Growth should accelerate despite the drag of a strong dollar and retrenchment in shale oil and gas investment, while significant, broad-based job creation takes centre stage. The clear improvement in the labour market will lead the Fed to raise rates in the autumn, before the risks of not tightening outweigh the risks of doing so.”

Brender added that the US is now creating far more jobs that are better paid than18 months ago. Lower income-earners are enjoying higher wage growth, helped in part by initiatives by Walmart and other large employers of less skilled workers to boost pay packets. Net job creation for the “squeezed middle” income group is now also returning. Skill shortages and wage inflation are thus likely to feed through as the US economy approaches full employment.

Candriam regards the current price of oil of around $65 a barrel as a sustainable level for this year and next. It should shelter the “Big Three” U.S. shale oil and gas basins, that have accounted for the bulk of the increase in domestic and world production in the last few years, from further precipitous falls in investment and output. If the oil price does engage in another $20 to $30 downward leg for a long period, however, then the call on OPEC would quickly increase and prices would soon move higher.

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