The U.S. Economic Growth: Steady but Still below Potential

The U.S. economy is continuing its steady albeit snailpaced growth. Consensus expects this trend to continue well into 2015 with GDP growing at the rate of 2.23 percent between 2014-4Q and 2015-3Q. Gradual firming of consumer confidence and spending combined with business investment and expected growth in construction due to the demographic tailwind will continue to propel its growth. However, the growth appears to be below its potential, and there is room for improvement. A study by the Brookings Institution indicates that entrepreneurship, the engine of growth, has declined in the U.S. to at least a three-decade low in all sectors of the economy. High concentration of patents ownership in the hands of a few firms in the Silicon Valley is not helping either. CONSUMERS Mark Zandi of Moody’s believes that high-quality job growth combined with high stock values and a rebound in home prices should have boosted consumer spending more than what we are experiencing. Consensus data indicate that consumers remain skittish and are holding back. Data The U.S. Economic Growth: Steady but Still below Potential By Jamal Nahavandi, Ph.D. Dr. Nahavandi is Associate Professor of economics ...