According to the latest survey taken by the National Association for Business Economics, the pace of the United States will be stuck at about a 2% increase in the next two years (2017 and 2018) while Trumps projections included around a 3% increase. Although the economy has picked up over the course of the end of quarter, the slow start will have some impact on the overall growth of the United States.
There is good news to go along with this, though. Economists have predicted that recession will not hit in the next couple years. It was said there is a, "25% chance or less" that a recession will actually hit. In the long run, the Trump administration sees the GDP growing gradually to 3% by 2020. This is still lower than the average rate, but it is an improvement from the 2% the United States is currently sitting at.
This would be looked at negatively for Trump because he has been hoping for higher growth rates since he has taken office. With this being said, the economists have predicted that there will be tax cuts in the near future, with Trumps infrastructure plan being passed soon as well. This would have some effect on bridges, roads, etc. With these two being put in place, the GDP is expected to rise about a quarter percent (0.25%) by the end of 2018
This would be a plus for the United States economically, but this would also mean that the government would probably have to increase its spending. I think this would be a plus for the economy as a whole, especially after the devastating hurricanes that have hit the United States which has set back the economy as a whole. But, that is if the GDP growth is predicted correctly.
https://www.usatoday.com/story/money/2017/09/25/economists-see-slower-growth-u-s-than-trump-does/699429001/
The US Federal Reserve, our central bank seems to have a GDP growth forecast right in the middle of Trump's and the National Association for Business Economics. They expect growth of the US economy at 2.4%, which is higher than the 2.2% prediction they had a few months ago. The Fed did take the effects of the recent hurricanes in the US into account in making its forecast although they think the effect will be more so short term. See http://www.politico.com/story/2017/09/20/federal-reserve-us-economic-growth-242940
ReplyDeleteTrump has a couple of initiatives to reach his goal of 3%, but I do not see how tax cuts and the infrastructure plan will change GDP growth a whole point in the short term - hence the "slow start." A long run increase of GDP is possible if these plans come in to fruition, and I am curious as to how the administration will articulate these money spending solutions. A 25% chance of a recession is also something notable.
ReplyDeleteGDP will increase from the final goods and services purchased from the increase in infrastructure. The tax cuts will allow households more disposable income (Y-T). Which will increase consumption, and possibly investment (purchase of new homes) in the long run. Trump may have overestimated growth, but at this point, growth is important. The government will focus on growth and look to stay out of recession. It is important that we help the hurricane victims, the spending is necessary from our government. We will look to make up for that spending in other ways.
ReplyDeleteI believe that the Trump administration is intending on helping the economy in the long-run. So the slow start, while important, could be a result of the short-term. I also think it is important to take care of the Hurricane victims first. The Hurricanes have hurt the economy of the United States in terms of their growth. It will be interesting to see what these changes will lead to in the long-run of the economy.
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