A Quick Reminder That The US Economy Is The Envy Of The World
The US economy is showing sufficiently surprising vigor to induce us to nudge up our forecast for real GDP growth this year and next. This puts us out of sync with some of our colleagues covering other major economies, who are marking down near-term numbers, but data are data and wealth creation is a powerful force of forward momentum. The last time we wrote down a forecast, in March, private sector spending was expected to be resilient. The severe financial crisis had already exacted most of its toll on the level of activity so its drag on growth was abating. The healing in the housing market is emblematic of this process. Now, residential construction provides an above-trend contribution to GDP growth, home-price appreciation adds to wealth, and some households that had been underwater on their mortgages are lifted back into daylight.
For 2013, US GDP growth has been nudged up from 1.6% to 1.9%.
And for 2014, estimates go from 2.5% to 2.7%.
None of these are that impressive figures, of course, but as Reinhart notes, the direction impressive than what's being seen elsewhere.
And they come at a time of a sequester, and a significant shrinkage in the size of the Federal deficit, meaning that the US is overcoming consolidation nicely, which is another surprising fact that should make the rest of the world envious.