UMB’s 2015 Prognosis: More momentum

UMB Bank’s Chief Investment Officer KC Mathews anticipates continued momentum for the U.S. economy in the year ahead, enough that he expects the Fed to raise short-term interest rates, likely around mid-year. Thus, Mathews has dubbed his upbeat 2015 forecast “The Liftoff.”

“We’re kind of stealing the Fed’s term,” Mathews explained back in mid-December. “In the jargon of our business, when the Fed increases rates, that’s called ‘liftoff.’ We’re taking that term and applying it more broadly. Not only do we see significant improvement in economic growth, I think it will give plenty of comfort to the Fed that if the economy is growing at that speed, it can easily start to raise rates and normalize the situation. And it won’t derail the economy because of the strength and momentum we have.”

Among the positives, Mathews points to the steady increase in U.S. job creation over the past two years, a trend he expects to continue in 2015.

“In 2013, we created an average of 191,000 jobs per month. In 2014 we created about 228,000 per month. [This year] we’re probably going to add about 250,000 jobs per month on average. So 191,000 to 228,000 to 250,000 – that’s a big positive for economic growth, for consumer confidence and things like that.”

UMB’s positive outlook for 2015 was reinforced by CEOs whose firms won the ColoradoBiz Top Company awards last year. As has become tradition, CEOs of the Top Companies from various industry categories were rewarded with a three-day retreat in October to California’s Napa Valley sponsored by UMB, Deloitte and Holland & Hart. The trip includes an economic roundtable where feedback from executives in industries ranging from financial services to manufacturing adds ground-level insight to the bank’s number-crunching analysis.

Mathews said feedback from 2014’s group of winning CEOs, as well as surveys of CEOs around the country UMB conducts several times during the year – was strikingly upbeat. In fact, he said optimism expressed by CEOs heading into 2015 is at the highest level since before the Great Recession, which officially ran from December 2007 to June 2009 but weighed on the economy for years longer. Moreover, Mathews said, consumer confidence is the highest he’s seen since 2001.

“We always ask standard questions: How is your business? Are you expanding? Are you hiring?” Mathews explained. “I would say one definitive conclusion we walked away with was that business owners feel good about things, and they’re hiring people. That tells me that the consumer feels good about things because the only time these small-business owners hire people is when you have strong demand for their products and services. So that kind of supports our 2015 forecast of liftoff.”