US: Moderate growth expected through to 2018 - NAB

Tony Kelly, Senior Economist at NAB, suggests that the U.S. economy had a weak start to 2016, but they forecast it to rebound, with moderate growth expected through to 2018.

Key Quotes

“Labour market still solid, despite slightly slower than expected April non-farm employment growth.

In all likelihood it is a combination of many factors that have caused the productivity growth slowdown. Some may well be reversed – the impact of the dislocation caused by the recession should fade over time; some possibly could be reversed (micro economic reforms to encourage dynamism); others may not be possible to reverse (there is a limit to how many people can go to university, and as the recovery continues even more marginal productivity workers might be drawn into the workforce). Some factors might change, e.g. as labour becomes more scarce (and probably more expensive), businesses may invest more in new equipment.

How these various factors play out will be crucial for the performance of the U.S. economy (and livings standards of households). Research suggests that forecasting productivity growth is particularly difficult (if not possible); implicitly our GDP forecasts assume productivity growth does strengthen over the next several years, but to a level on the low side of historical experience.

Productivity growth in the U.S. remains weak, reflecting a variety of factors.”