The U.S. economy is now in its 65th month of expansion, since the end of the Great Recession in 2009.  It’s been a disappointing expansion, with growth averaging only 2.3% per year.  But growth was more rapid in the second and third quarters of 2014.  Is there reason for optimism?  Will this expansion finally take off?

There are lots of reasons to think that consumers will spend more in the coming year.  Consumer confidence is up.  Unemployment is down. Home prices are rising.  Household debt payments as a share of income are at 30-year lows.  Consumption spending probably will rise faster in 2015 than in 2014.

Home building will probably rise too.  There is only a five and a half month supply of homes for sale, low enough to cause home prices to rise.  Mortgage rates remain low. That should encourage more construction.  Business in-vestment looks less rosy.  Capital goods orders are growing slowly.  Still, if consumers spend more, businesses may invest to add to their productive capacity.

Indications are mostly positive for consumption and investment.  In the second and third quarters real gross domestic product growth averaged 4.1%.  Surely that’s reason for optimism.  But we’ve heard this story before.  In four of the past five years higher growth in the fourth quarter was followed by disappointment in the first quarter.

Something like that could happen in 2015.  The two components of GDP that contributed most to the GDP acceleration in the last two quarters were exports of goods and national defense spending.  Combined, increases in those two added a point and a half to growth.

Japan is in recession now.  Europe may just avoid recession in 2015.  China is growing more slowly (for China).  The exchange value of the dollar has been rising, raising the cost of U.S. exports to our trading partners.  With lower incomes, at higher cost, the rest of the world is unlikely to increase purchases of U.S. exports.

The Congressional Budget Office does not foresee any in-crease in real defense spending in fiscal year 2015, which began with the fourth quarter.  Recent increases may be a matter of the timing.  Defense spending will not contribute much to growth in 2015.

Consumption will grow.  So will investment.  But real GDP growth closer to 2.5% than 4% seems likely for 2015.

That should be enough, though, to bring down the unemployment rate from its current 5.8%.  Over past decades growth above 3% was needed to reduce unemployment, but that has changed with the slowing growth of the labor force.  Now unemployment can fall with slower growth.  Expect an unemployment rate down near 5.3% by this time next year.

Inflation has been something of a mystery since the Great Recession.  Rapid money supply growth should have pushed inflation to near 10% per year.  It didn’t. Years of high unemployment should have plunged us into deflation. It didn’t. Inflation has averaged 1.8% over the past year, about where it’s been since the expansion began.  Falling energy prices should help keep inflation low in 2015.  Expect inflation to hold steady at just under 2%.

The Fed has ended quantitative easing part 3, and has hinted at an increase in the Federal funds rate in 2015, if the economy holds up.  That policy interest rate has been near zero since the end of 2008.  Interest rates will prob-ably edge upward in 2015, but the Fed’s caution, and the rest of the world’s eagerness to lend in the U.S., should keep the increase small.  Expect an increase in the 10-year Treasury rate from 2.5% to 2.75% by the end of 2015, and an increase in the 3-month Treasury rate from near zero to 0.3%.

Overall:  Better than the recent past and much better than the rest of the developed world.  But still not the boom we’re hoping for.