UBS: We think this will go down as one of the longest US economic recoveries in history
UBS
The economists at UBS are unfazed by the recessionary warning signs."Achievement of our forecast means that the current economic recovery will become one of the longest on record," UBS's Maury Harris wrote in a new note to clients.
Harris' team expects real GDP to increase by 2.8% in 2016 and 2.5% in 2017. If realized, this recovery, which began in June 2009, would have lasted an incredible 102 months.
"Two main drivers are reasonable credit availability for most borrowers and faster wage gains," he explained.
Credit availability has been a controversial subject in the markets lately with junk bond spreads expanding and financial market volatility generally elevated.
However, tightness in credit markets seems to be largely isolated in the energy sector where companies have been crushed by low oil prices. Surveys, like the NFIB small business report, suggest credit is very much readily available to small business.
UBS
"Small businesses are pivotal for economic expansion and the fraction of such businesses unable to obtain adequate credit remains very low," Harris said. "Our UBS all-loan composite bank lending standards index continues to signal relatively abundant bank credit and healthy private sector job formation."Harris notes that wage gains will benefit from these favorable credit conditions as it will enable businesses to engage in hiring, bringing the unemployment rate down.
In terms of downside risks, Harris acknowledges that weakness in exports and disappointments in capital expenditures could pull the GDP growth rate down to around 1%. But Harris also sees a 15% chance that healthier-than-expected household formation could send the pace of growth to 3.5%.