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Driving Fast Essay

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What is Driving Faster US Economic Growth? According to the latest “live” Q4 real GDP growth forecast courtesy of the Federal Reserve Bank of Atlanta, the US economy is expected to expand +3.3% during the current quarter. Should this expectation prevail, then the economy will have enjoyed three successive quarters of GDP growth in excess of 3%, the first occurrence since 2004 H2 and 2005 Q1. The biggest difference between the aforementioned period and the current environment is the underlying strength of real final sales. Currently, real final sales are averaging +2.8% over the past three quarters, while this metric was a more robust +3.6% during the 2004 H2 and 2005 Q1 period. What are the driving sources behind the recent faster …show more content…

Meanwhile, the Conference Board’s measure of consumer confidence recently reached its highest level since December 2000, which, incidentally, coincided with the peak of the 1991-2000 economic expansion. Furthermore, much of the improvement is attributable to current conditions versus the anticipated backdrop six months’ hence. Currently, perceptions about abundant job availability have reached their highest levels since the summer of 2001. Historically, there has been a close correlation between wage inflation and perceptions of job availability. There is, however, a disconnection between the two during the current cycle, because wage inflation still appears reluctant to breach +3%. Despite the apparent lack of upward pressure on nominal wages, consumer confidence has been rising. This dichotomy is probably explained by the low level of the so-called misery index (the summation of consumer price inflation and the unemployment rate). Moreover, real wage gains have been positive due to the persistence of low inflation and this probably explains why, despite modest nominal wage gains, consumers feel more upbeat. This situation could, however, change if inflation rises, thereby pushing inflation-adjusted changes in labour compensation into negative territory. Upbeat US Consumers Appear to Ignore Political Backdrop The 2016 Presidential Election spectacularly highlighted long and simmering divisions within the US electorate. Crucially, the election also

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