United States Economic Forecast
Introduction
The United States of America is one of the leading economies in the world. Diversification of its economy has made it possible to enjoy, compete, and offer a variety of products in the world’s market. Processing and manufacturing its high quality products in the market create confidence to the consumers, enabling an increase in foreign exchange. Economists play an important role in advising both the government and private sectors. Analyzing past and present economic trends, they are able to predict the future. These predictions help them develop policies or actions to maintain an efficiently run economy.
Gross Domestic Product
Gross domestic product in the United States is measured on a quarterly basis. In the past few years, the United States has experienced a significant growth in its GDP. In the first quarter of 2018, there was a significant increase in GDP of more than 0.2%. The economic policies and an enabling working environment by Donald Trump’s regime play an important role, as current data shows an increase of GDP in each quarter. This will be attributed to the increase in the processing and manufacturing of goods. There is strong evidence that there will be yet another significant GDP growth in the final quarter of 2018. The United States government funds federal, state, and local governments. This basically allows and enhances the smooth running of all operations at each level. Priorities in the spending in terms of service delivery to the citizens include: health care, defense, pension, transportation, and education. Although these sectors are functioning and well equipped, population increase creates more pressure – hence the need for expansion. With changing technologies being experienced in the recent days, the government has no option but to ensure that it is operating with the current and upcoming technological innovations. This simply means that government spending is also likely to increase in order to facilitate its operations.
Inflation, Energy and Food Prices
People commit their energy and minds to work in order to earn a living. Increase in personal income is directly related to consumer spending. The existence of well-organized labor unions takes up the role of negotiating with the government to increase salaries and wages to employees. The government decision to increase salaries, wages, and other social benefits will have a positive impact on GDP. This will cause standards of living and purchasing power of the citizens to increase and provide consumers with more money to spend on both goods and services, consequently bringing in higher revenue for businesses.
The United States has a diversified economy. It imports raw materials and processes them to finished products, later exporting these finished goods at higher prices. Sometimes, the exports end up at the countries from which they were acquired. After the industrial revolution, the U.S. became one of the leading exporters of pharmaceutical products and computers. In the manufacturing sector, it is ranked to have the best military equipment and medicines. These are some of the commodities becoming very vital to people in the twentieth century. Increased demand has provided a large market for these products all over the world. This is a clear indication of the U.S. registering high exports. By exporting more and importing less, it is earning an abundance of foreign currency that contributes to a higher percentage of national income.
Prices of oil in the world market are traded in terms of the U.S. dollar. Worries on the state of the economy and increased global production of oil in the third quarter led to a reduction in the prices of oil. However, this price is the price that was expected to rise in the last quarter. Expectations of prices to rise means that inflation rates will rise as a result. Oil is used by many sectors of the economy, so a rise in its price basically means prices of products will increase, leading to an increase in inflation rates.
Food prices generally depend on the cost of production. Food products undergo various stages such as processing, transportation, and storage cost, which determine the prices. The prevailing economic conditions and government policies will play a critical role in determining these prices. An increase in inflation rates and energy prices will dictate the prices of food. The government is determined to ensure an affordable cost of living to its citizens. An increase in mechanization has led to increased production in the agricultural sector. Adequate food is available to ensure food security throughout the year, eliminating cases of low supply that can lead to increases in the prices of food. These practices are aimed at reducing food prices.
Unemployment and Underemployment
Unemployment rates in the United States are increasing. Those willing to work are not able to get jobs of their preference or matching abilities. At times people are forced to settle for jobs that they are not necessarily willing to do. Unfortunately, for the sake of earning a living, they have no option but to take jobs for which they are overqualified. Although the government is trying to create more job opportunities, the large number of youths coming out of colleges and universities is high compared to job opportunities available. However, the creativity and innovative mindsets of young people, such as those of Gen Z and millennials, have enabled some to be self-employed. Ultimately, the unemployment situation is going to continue until the government comes up with more strategies to counter this problem.
Asset Prices
Asset prices will either appreciate or depreciate. Depending on the prevailing economic condition, an increase in inflation rates indicates that the value of money has been depressed. Individuals willing to acquire assets are likely to pay a high amount of money that will not match their value. Consumer income dictates spending habits. An increase in wages and salaries has a significant impact on the purchasing power of individuals, as it also increases assets and the capacity to take mortgage loans. The demand for assets will increase, and in return their prices will increase, meaning consumer will have to pay more.
Business Cycle
A business cycle is determined by the state of the economy. The economy can never remain stagnant at any given point, as it will experience both positive and negative changes. Growth will be experienced in the economy and at a certain point, it will reach its prime where no growth can be experienced. Changing economic conditions will make the economy contract, leading to a recession. However, the government is always vigilant by imposing either fiscal or monetary policies in order to keep inflation in check. In this current state of the economy, inflation has been controlled and only minimal changes can be experienced.
Monetary and Fiscal Policies
Monetary and fiscal policies stabilize the economy. Since these policies play a critical role in the economy of a country, it is the task of the central government to control how these policies are created and implemented. Depending on the state of the economy, the government uses these policies to stabilize it. High inflation rates being experienced means that the government will reduce its spending and borrow from the public to reduce money supply in the economy. Imposing high taxes and interest rates by institutions offering loan facilities will reduce the money supply in the economy. As much as these policies will stabilize the economy and bring it back to normal, government development plans are likely to be on halt. This means that the citizens will pay higher taxes and those willing to acquire loans might be scared by the high interest rates imposed. Current changes in the economic environment are happening both domestically and internationally. Since the U.S. is making treaties with other countries and trading blocks, it might be forced to formulate more monetary and fiscal policies so that its economy is not compromised at all.
Currency Value
World markets use the dollar to facilitate transactions. The U.S. dollar has maintained its value over other world currencies and the value of the dollar will decrease the prices of products in the market. The U.S. dollar controls the prices of oil and steel, critical products in the world market used by all countries. Enjoying this privilege, the United States is able to regulate its currency and ensure that it does not lose its value at any given time. In the recent days, the U.S. dollar continues to gain its value over other currencies, such as the euro and pound.
Conclusion
In conclusion, the above forecast indicates how the US economy is likely to be in the final two quarters of 2018. Increases in both the GDP and national income mean that the economy is experiencing growth. Unemployment, business cycles, and energy prices have a negative impact on the economy. A huge amount of foreign exchange earned from exports helps to raise money to facilitate other government projects. As much as economist or statisticians try to predict what will happen in future, this does not necessarily mean that it must happen as it is predicted. Changes in the economic environment can alter these predictions. It is upon the government to formulate policies that ensure its economy is on the right track whatever the case.