- By Todd G. Povlich, CFA, ASA
- September 21, 2015
As a business valuation and advisory firm, MPI regularly observes and reports on financial trends and outlooks. Our most recent Economic Update is a review of the first half of the year for the economy, which saw growth in some sectors and losses in others. However, after a sluggish start to 2015, real GDP growth accelerated in Q2 and is expected to continue at a steady pace for the next several quarters.
Nonetheless, the positive outlook for the U.S. is tempered by weakness abroad. In the last several weeks of the second quarter, Chinese stock markets lost almost one-third of their value despite Chinese government intervention. The decline in China’s stock markets sparked additional worries among investors about oil demand in the world’s second largest economy. Crude oil prices declined from $115 a barrel in June 2014 to $63 a barrel in June 2015, primarily the result of decreased demand and excess supply.
Noteworthy for Q2 2015:
GDP exceeds estimates
- 2.3% growth in Q2, spurred by consumer spending
- Projected GDP growth of 3.1% for the second half of the year and 2.9% for the first half of 2016
- Surge in consumer confidence – Thompson Reuters/University of Michigan Consumer Sentiment Index hit 96.1 in June 2015
Corporate profits expected to fall
- Strong U.S. dollar resulted in decreased demand for U.S. exports in Q2
- Federal Reserve anticipates increasing interest rates
Housing market recovers
- Existing home sales in Q2 reach highest level in nearly eight years
- Historically low interest rates
- Job growth and improved economy allowed for more buyers
- Initial phase of mortgage rate hikes incents buyers to act before additional increases
Labor market dissonance
- Q2 Unemployment rate at 5.3%, the lowest level in seven years
- Labor force participation rate at 62.6%, the lowest level in 37 years
Although it was not all good, 2Q economic indicators are giving forecasters a positive outlook for the economic future. The Federal Reserve projects GNP growth of 2.6% to 3.0% for 2015. In addition, they expect unemployment will drop to 4.8% – 5.3% by Q4.
MPI, a prestigious national consulting firm founded in 1939, specializes in business valuation, forensic accounting, litigation support and corporate advisory work. MPI provides fairness opinions, sell-side and buy-side advisory services through its investment banking affiliate MPI Securities, Inc. MPI conducts every project as if it is going to face the highest level of scrutiny, and its senior professionals have extensive experience presenting and defending work product in front of financial statement auditors, management teams, corporate boards and fiduciaries, the IRS, other government agencies, and in various courts.