82% Of Economists Expect September Rate Hike… It’s Not Such A Sure Thing

As we get closer and closer to the month of September, the discussions with regard to the Federal Reserve's interest rate is coming up more and more. While no one knows exactly when the Fed is going to raise rates, we've seen quite a few predictions recently. As a matter of fact, a recent Fortune poll shows that 82% of economists are expecting the rate hike to happen in September. However, I'm not convinced that the US will be ready for a rate hike in September. Today, we'll talk about the factors that may help drive a hike, the factors that I think are likely to hinder any increase in rates, and what we can expect to see moving forward. So, let's get right to it…

Why Economists Believe A Rate Hike Will Happen In September

There are several reasons why economists believe that a rate hike is likely to happen soon. These reasons include…

• Strong Job Growth – First and foremost, there has been quite a bit of discussion about jobs in the United States; and for good reason. Throughout the past several months, we have seen incredible growth in the number of jobs in the United States economy. As a matter of fact, in July alone, employers added 215,000 jobs to the US economy and held the unemployment rate at the lowest rate we've seen since April of 2008; 5.3%.
• Increased Consumer Spending – While consumer spending was a drag on economic growth throughout the beginning of the year, that doesn't seem to be the case anymore. As a matter of fact, consumers are starting to spend more; pumping more funding into the economy. According to the Wall Street Journal, US consumer spending rose by 0.6% in the month of July; which was right in line with economist expectations and shows that consumers are gaining confidence in economic growth in the nation.
• Oil Exports To Mexico – As a result of a strong United States dollar, exports have been feeling the pain. However, recent movement may help to improve this figure. Recently, the United States lifted a 40-year crude oil export ban and started allowing exports to Mexico. While this move surely won't cure the exports issue the United States has been facing recently, it certainly will help.

What Factors Are Likely To Hold Back A Hike?

While there are solid signs that show the US economy is growing, there are also several signs that show that the economy could be in significant danger. These signs include….

• Yuan Devaluation – In a surprising move, China decided to devalue the yuan; hoping that doing so would stimulate the Chinese economy. However, this is likely to weigh heavy on US exports. The simple fact is that China is one of the world's largest economies. With a devalued yuan, US made products are becoming more expensive in China; which is likely to drive US exports to the nation down.
• Existing Home Sales – Although consumers seem to be spending more on goods, they're not quite spending on homes. As a matter of fact, in the month of may, pending home sales grew by only 0.6%; far lower than expected. That was followed by an unexpected decline in pending home sales in July of 1.8%.
• Struggling Energy Sector – The energy sector plays a key role in the United States economy. However, recently the energy sector has been struggling. Fueled by an oil supply glut that's likely to get worse as the result of the Iranian nuclear deal, oil is continuing on the decline; creating massive issues for all major energy companies.
• US Salary Growth – US wage growth has been a big topic of discussion recently as well. While more jobs are being added, wages simply aren't keeping up. As a matter of fact, in the second quarter, US wage growth came in at just 0.2%. To put that number into perspective, this is the smallest growth we've seen in the figure since wage growth recording began in 1982. While there's no way to tell if it is the smallest growth in history, it's definitely a major cause for concern.

Final Thoughts

While there are plenty of factors showing that the US economy is doing well, there are also plenty of causes for concern with regard to economic growth. With that said, I think that the negative factors outweigh the positive factors in this particular case. Therefore, I don't think we're going to see a rate hike in September. As a matter of fact, as I've mentioned in previous articles, I think that the Federal Reserve is likely to delay its interest rate hike until next year.