The beginning of a new year means it’s time to hit the road – literally. Every January and February the UMB Private Wealth Management division visits nearly a dozen cities to deliver UMB’s annual economic forecast presentation to clients. The theme of this year’s presentation is “The Sequel‡.” Never short on drama, the economic story this year draws a parallel to a movie sequel‡, although, we believe it will be better‡ than the original (2013’s forecast).
Last year’s economic theme, “The Policy Basin,” predicted slow or low, basin-like growth. Most companies weren’t ready to begin hiring yet; capital expenditures‡ were mainly on hold and consumer spending was noticeably low – clearly still on the defense from the Great Recession of 2008. And, that is exactly how the economic picture played out last year.
As an extension to last year’s theme, this year’s economic picture is slowly but surely looking better. We predict real GDP will improve from 1.9 percent in 2013 to 2.7 percent this year. This will be driven by the following factors:
- There will be an increase in consumption as consumers perhaps end the deleveraging‡ phase and enter the re-leveraging phase.
- Increased spending in state and local governments is expected, as these entities will benefit from a boost in property, sales and other tax revenue. All but seven states‡ have indicated that they intend to increase spending from 2013.
- We believe better economic growth in 2014 will generate close to 200,000 additional jobs per month‡, which is up from 185,000 per month last year. This growth in additional jobs should reduce the U.S. unemployment rate to 6.0 percent by the end of the year, down from the 6.7 percent at the end of 2013.
We are looking forward to 2014 delivering more employment, improved consumer sentiment and strong GDP growth. And while this year’s economic story might not be a blockbuster, we believe it will be a positive year with good storylines for consumers and businesses, and if managed correctly, for investors as well.
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K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.
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