Dr. Roger Tutterow Offers 2016 Economic Predictions

When the Federal Reserve raises interest rates today for the first time in nine years, don’t panic. That’s the word from Dr. Roger Tutterow, economist and professor at Kennesaw State University. While TV talking heads may be fretting about the Fed tightening monetary policy, a 25 basis point increase in the Federal Funds rate means, “we are going from an insanely accommodative monetary policy to a very accommodative monetary policy,” that will likely leave the Fed Funds rate at 1.5% or lower. That translates to a 4.5% Prime Rate, which shouldn’t discourage borrowing.

Tutterow made his statement as part of a talk on the economic outlook for 2016 given to members of the American Council of Engineering Companies of Georgia on Tuesday.

A year ago Tutterow predicted 2015 economic growth of 2.4%. The country’s economic performance will fall slightly short of that for several reasons. Two of those were temporary: the extremely bad winter in the northeast, and labor issues at the Port of Long Beach. Both slowed down the economy for a time. However, the strong US dollar, while showing the relative strength of our economy–“We are the least dirty shirt in the hamper,” Tutterow said–also means that exports took a hit as prices of US manufactured goods became relatively more expensive overseas. The strong dollar probably took 1% off of GDP growth this year, according to Tutterow, and is a concern going forward.

Another ongoing concern for the economy is the low price of crude oil. While lower prices for energy help consumers and businesses alike, much of the progress the country has made in the recovery from the great recession has been in the energy sector. With oil prices being so low, it becomes difficult to make a profit extracting oil from the ground, much less expanding drilling capacity. Tutterow sees crude oil prices in the $40-$55 per barrel range for much of 2016.

While previous drops in oil prices have led to production cuts that eventually bring the price back up due to supply and demand, this time, Saudi Arabia and OPEC are acting differently. Tutterow has two theories for this: first, that the Arab countries don’t want United States oil production to become too dominant, and are keeping prices at a level where it’s impractical to expand energy production here. The other possible reason involves geopolitics. Middle Eastern extremists gain much of their cash through selling oil, and by keeping prices low, their access to cash drops. Meanwhile, low energy prices are no help for Russia, which is trying to increase its hegemony in the region.

Looking towards 2016, what does he see? Consumer spending, which picked up at the beginning of this year, will remain in place, but business investment will remain restricted, especially if oil prices remain low. Tutterow is calling for a 2.25 percent increase in GDP next year. He also sees less than a 25% chance of a recession, and predicts a low inflation rate of around 1.47%, or flat if prices of food and energy are removed.

Towards the end of his talk, Tutterow turned to politics. Noting that Ted Cruz has pulled ahead of Donld Trump in the latest Iowa polling and the Chris Christie and Marco Rubio are doing battle in New Hampshire, he was reluctant to publicly name a favorite candidate. But, he pointed out, the political map will be key. States like Georgia won’t count, he says, because they aren’t competitive. Georgia will vote for the Republican nominee a year from now. Instead, who controls the White House will be decided in North Carolina, Florida, Virginia, Ohio and other purple states. “When the parties look at their candidates,” Tutterow said, “they have got to pick people who can run well in that part of the country.” Tutterow pointed to areas like the I-4 corridor in Florida, Hamilton County, Ohio and Douglas County Colorado as key locations that will determine the presidency. He says the electoral map favors Democrats, and at this point, futures markets predict a 60% chance that Democats will hold the white house.


  1. xdog says:

    Did he address the removal of restrictions on US crude oil exports? I’m trying to figure how that change will benefit anyone besides oil traders, especially in a world awash in oil.

    • gcp says:

      Let US oil trade freely on the world market like any of our other commodities. No need to restrict oil exports.

      If there is a crisis in the Mideast and oil is in short supply then we restrict exports but otherwise let it trade freely.

      And yes we do need a 25 basis pt increase this month and a couple increases next year.

        • gcp says:

          We need rate increase because:

          1. A near zero rate is an unnatural rate that encourages both government and non government debt which was partially responsible for the ’08 financial mess. I favor more of a floating interest rate.

          2. Savers need a little more interest on their savings.

          3. The markets expect an increase.

  2. Scott65 says:

    First, I see absolutely no real reason to raise rates when we are no where near the 2% inflation target and wages for the most part are flat. If monetary policy was so accommodating, you would have inflation which tells me the economy isn’t that strong. Second, and most important, what if this is the wrong move? You dont have a whole lot of tools to fix it. If you leave rates unchanged and the economy heats up and there is inflation…you just raise rates. You have much easier fixes if you have inflation and far fewer if raising rates is a mistake. Lets remember all the predictions from six or seven years ago. We’d have runaway inflation, we would debase the currency, and the economy would tank. These were all stated by Paul Ryan, Bowles Simpson, etc.
    They were all spectacularly wrong. There is no harm in leaving rates as is, and the policy fix is easy if thats a mistake. Raising rates would incur a huge amount of risk because if THAT is wrong, the fix is very difficult because congress is essentially dysfunctional.
    Also, an economist who cares to show he supports one party over the other is one whose opinions should be highly suspect.

    • xdog says:

      Ryan I’ll give you and a passel of other QE-is-evil, better-buy-gold-now husksters on the right too, but Bowles-Simpson were concerned about reducing the deficit by increasing taxes and cutting expenditures. You know, the same things you and I would do. I don’t recall them cautioning about hyperinflation.

      I don’t understand your concern about the small rate increase. If things go bad, as you suggest they might, the Fed will cut rates again. That’s their job.

      • Scott65 says:

        The problem is that if the rate increase slows the economy into recession a quarter point drop wont help. Increases and cuts in rates do not have the same effect in a liquidity trap (where rates are at zero). Fed policy is highly effective at fighting inflation, but at the zero bound is is very ineffective at prodding growth without fiscal solutions our congress wont provide. Alan Simpson did indeed warn about inflation and the coming fiscal crisis within 6 months (six years ago). That had more to do with his Pete Peterson paid for propaganda on the debt (which I still say doesnt matter right now)
        My point is…why take a sizable risk when nothing points to the need to do so? Isnt that a conservative point of view??

        • John Konop says:

          The problem is personal and national debt are growing at an irrational level relative to low GDP growth. Not sure the rate hike will even slow it down…but we have way to much money chasing fools gold…

  3. Dave Bearse says:

    The most important change the GOP extracted in connection with the budget is to allow the export of oil?

    Yeah, legislation that can only raise gas prices (not that that’s going to happen) and line the pockets of giant oil companies employing hoards of Washington lobbyists will sooth the angry GOP middle class’ supporting Trump.

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