BNY Mellon Investment Boutique Expects Further Easing by European Central Bank
Standish Mellon Asset Management Company LLC, the Boston-based fixed income investment boutique for BNY Mellon, is anticipating a quick end to the soft patch in U.S. economic growth and an increase in the annual rate of real gross domestic product growth to between 2.5 percent and 3.0 percent in the second quarter of 2014.
Standish's observations were published in the May Global Macro Views, where it noted the harsh winter weather held U.S. growth in the first quarter to an anemic annual rate of 0.1 percent. A recent increase in hiring, though, is expected to boost consumer spending, helping to lift growth, the report said.
Overall, Standish retained its forecast for global GDP at 3.5 percent for 2014 and 3.7 percent for 2015.
In the euro area, purchasing managers' surveys indicate an ongoing expansion, Standish said. "Economic growth has surprised to the upside despite a slowdown in the broader global economy suggesting that the risk that Europe will relapse in recession is low," said Thomas D. Higgins, chief economist and chief global strategist for Standish. However, he added, "Public and private deleveraging across the periphery economies including Spain, Italy, Portugal will restrain growth."
Standish expects further easing from the European Central Bank as its inflation forecast still appears too high and will need to be adjusted. Such policies would continue to put downward pressure on the euro, the report said.
Looking at Japan, Standish notes this spring marks the first widespread increases in wage growth in over a decade. "It remains to be seen if wage growth will be sufficiently robust to prevent the erosion of purchasing power in a higher tax and inflation environment, but the key metrics are moving in the right direction," Higgins said. Standish forecasts GDP growth at one percent in Japan for both 2014 and 2015.
In the United Kingdom, the expansion appears to be driven by both manufacturing and services, with GDP growing 2.7 percent in 2014 and 2.5 percent in 2015, Standish said. "We expect GDP growth to slow during 2014 as the U.K. economy transitions from a relatively fast-paced recovery to a more sustainable rate of growth," Higgins said.
While Standish expects China's GDP growth to slow from 7.2 percent in 2014 to 7.0 percent in 2015, it noted that fiscal and monetary policies should prevent a sustained loss in economic momentum. In Latin America, Standish is forecasting GDP growth of 2.5 percent in 2014 and 3.2 percent in 2015. Economic activity in the region should accelerate as it benefits from the recovering economy in the U.S., the report said.
Standish Mellon Asset Management Company LLC, with approximately $162 billion of assets under management, provides investment management services across a broad spectrum of fixed income asset classes. These include corporate credit, emerging markets debt (dollar-denominated and local currency), core / core plus, tax–sensitive, short duration, stable value and opportunistic (U.S. and global) strategies. Standish also offers full service capabilities in insurance client strategies and liability driven investing. The firm includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation and The Bank of New York Mellon and Alcentra NY, LLC personnel acting as dual officers of Standish. Standish, Dreyfus and The Bank of New York Mellon are affiliated subsidiaries of BNY Mellon.