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U.S. Economic Outlook: Quarterly developments

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U.S. Economic Outlook: Quarterly developments

Autor institucional: NU. CEPAL. Oficina de Washington Physical Description: 26 páginas. Editorial: ECLAC Date: November 2017 ECLAC symbol: LC/WAS/TS.2017/7

Description

The U.S. economic expansion remains on track and it has entered its ninth year. October marked the 100th month of growth for the U.S. economy. In about two years the current economic expansion will be the longest on record.1 The unemployment rate sits at 4.1%, the lowest level since December 2000, suggesting the economy has reached, or nearly reached, full capacity.
In the third quarter, the U.S. economy achieved a milestone: the output gap closed. This is the first time that the output gap, or the difference between the actual GDP (based on data by the U.S. Department of Commerce’s Bureau of Economic Analysis) and the potential output (calculated by the U.S. Congressional Budget Office), has not been negative since 2007. Potential GDP is the maximum amount of output an economy can turn out when it is most efficient—that is, at full capacity.
Gross domestic product expanded at a seasonally and inflation-adjusted annual rate of 3% in the third quarter of 2017, according to the Commerce Department’s advance estimate released at the end of October.2 Following an expansion of 3.1% in the second quarter, this marks the U.S. economy’s best six-month stretch since mid-2014. The third-quarter data reflected strong contributions from personal consumption, inventory investment and investment in business equipment, indicating resilient demand from consumers and businesses despite hurricane disruptions. Trade and federal government spending also made positive contributions (chart 1).
Forecasts for GDP growth in coming quarters show slightly slower growth (table 1), but no real headwinds are expected. The U.S. economy has been performing considerably better this year than in 2016, when it grew at 1.5%, in part because the economic situation has improved for much of the world, which is enjoying a rare moment of widespread expansion. Besides the global economy, demand from consumers and businesses are also supporting U.S. growth. Consumers are benefitting from a strong job market, their balance sheets are healthy and there is no shortage of credit. And businesses are being buoyed by a revival in corporate profitability, record stock prices, and low borrowing costs.