US Economic Growth: Projected Trends for 2016-2018

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Table of Contents

Introduction
Projected Trends in the Next 1-3 Years
Conclusion
Reference List

Introduction

According to the Bureau of Economic Analysis (BEA), the United States is one of the largest economies in the globe (An Update to the Budget and Economic Outlook, 2015). However, statistics from BEA indicate that the country’s economic growth rate has been dropping within the last six decades (An Update to the Budget and Economic Outlook, 2015). Throughout the 1970s and 1980s, the country economic growth rate stood at two percent.

This rate has reduced to 2 percent within the past one decade. The nation “gross domestic product (GDP) stood at over 17400 billion dollars in the year 2014” (An Update to the Budget and Economic Outlook, 2015, para. 3). Economists and analysts have argued that various changes will be observed in the coming years. This discussion gives a detailed analysis of the projected trends in the next 1-3 years. The analysis will focus on the country’s GPD, unemployment rate, budget, foreign trade and investment, interest rate, and inflation.

Projected Trends in the Next 1-3 Years

Gross Domestic Product

The “term gross domestic product (GDP) refers to the total monetary value of all the services and goods produced by a nation within a specific period” (Schmidt, Shelley, & Bardes, 2015, p. 12). According to the World Bank, the country’s GDP is equal to around 28 percent of the global economy. This fact explains why the country is the largest economy in the world today. Economic analysts believe strongly that the country’s economy will remain unchanged in the next few years. This is the case because the economy has been growing steadily at a flat rate of 2 percent within the past ten years. However, some fluctuations “might occur thus increasing the country’s GDP growth by 0.2 percent” (Schmidt et al., 2015, p. 28).

According to the Conference Board, the country real GDP growth for 2016 might be 2.4 percent (An Update to the Budget and Economic Outlook, 2015). This means that the GDP will have remained more or less the same. This data was predicted in accordance with the current labor markets, productivity, and innovative practices in the country (Schmidt et al., 2015). The political climate expected next year can also have numerous impacts on the country’s economy. This situation explains why many experts believe that the GPD growth rate might decrease slightly in 2017 (An Update to the Budget and Economic Outlook, 2015). However, similar shifts explain why the level of fluctuation will not be high in 2018.

Unemployment

The United States’ unemployment rate “has averaged 5.8 percent for the last six decades” (An Update to the Budget and Economic Outlook, 2015, para. 5). The unemployment rate in October 2015 stood at 5.0 percent. This was “the lowest unemployment rate level ever recorded since April 2008” (An Update to the Budget and Economic Outlook, 2015, para. 6). The unemployment rate has remained constant between 5.0 and 5.8 percent for the last few years. That being the case, experts believe strongly that the country’s level of unemployment will remain constant. More people have been “quitting their jobs with others finding new employment opportunities” (An Update to the Budget and Economic Outlook, 2015).

New jobs are also expected to emerge in various fields such as retail trade, food industry, construction sector, and healthcare. The economic policies embraced in the country are making it possible for more people to acquire new jobs. However, this move might not play a significant role towards reducing the unemployment rate in the nation (An Update to the Budget and Economic Outlook, 2015). This is the case because more people are in need of new job opportunities. The government has also not been using powerful measures to tackle the issue of unemployment.

The number of individuals without jobs is projected to remain the same in 2016. However, some skeptics have argued that the unemployment rate might increase in the first two quarters of 2016. This is the case because past researches have presented similar trends. The other important observation is that varied unemployment rates will be recorded for different racial communities (Schmidt et al., 2015). Experts and economic analysts encourage politicians and policymakers to identify new policies and strategies that can reduce the current level of unemployment in the country.

Budget

The American budget has been increasing steadily within the past few decades. The “American treasury offers three groups of federal spending” (Janda, Berry, Goldman, & Schildkrau, 2014, p. 16). These groups “include mandatory spending, interest on debts, and discretionary spending” (Janda et al., 2014, p. 16). Discretionary and mandatory spending expenses focus on different government programs. This fact explains why the two groups account for over 90 percent of the country’s budget. The third group “focuses on the government’s interests on every accumulated debt” (Janda et al., 2014, p. 21). The budget for 2015 was 3.8 trillion US dollars (Janda et al., 2014). This amount represents around 21 percent of the nation’s GDP.

Statistics presented by “CBO show that the budget deficit might reduce by 2 percent of the GDP in 2016” (Janda et al., 2014, p. 18). The same trend is expected within the next three years. Chances are very high that the government’s budget will increase steadily within the next three years. This will be the case if the existing policies and laws do not change. This means that the budget might increase in accordance with the country’s GDP growth rate. Experts have also argued that “the government might have to incur more expenses in order to support various healthcare programs” (Janda et al., 2014, p. 20). Population growth and demographic changes will also influence the country’s federal budget for the next few years.

Foreign Trade and Investment

The US economy encourages more people to spend their earnings. The country’s labor force and innovative technology has been playing a significant role towards supporting its foreign trade operations. This fact explains why the nation will record a continued growth in foreign trade in the next three years (HSBC Global Connections, 2015). The country is properly positioned to support the trade needs of every advanced and emerging economy. Future projections also “explain how the country will benefit significantly from emerging countries such as Brazil and China” (Janda et al., 2014, p. 42). It is notable that trade has always represented a small percentage of the United States’ economy. However, modern changes and trade liberalizations will make it easier for the nation to achieve its goals.

Many US exporters are expected to do business with different business partners across the world. The country is also expected to embrace the power of research and development (R&D) in the next two years. This move will ensure the nation produces superior products and services that can support the needs of many consumers in different countries (HSBC Global Connections, 2015). As well, the desire for various raw materials is expected to rise in the next five years. These projected changes will definitely create more opportunities for the country. The nation will also “increase its trade activities in different sectors such as information technology, banking, and international communication systems” (HSBC Global Connections, 2015, para. 4).

Studies have also indicated that the country has been embracing new trade liberalizations. This has been achieved through the use of regional and bilateral trade agreements. The country has established new regional trade activities with different countries across the globe. Its bilateral trade operations with countries such as India and China will definitely support the country’s foreign trade. Bogusz (2013) believes that “the nation will gain a lot from the projected trade activities” (p. 76). Experts have encouraged different businesspeople to focus on various emerging markets. The approach will make it easier for the people to achieve their business objectives. The country will increase its investments in different foreign countries (HSBC Global Connections, 2015). The current trade agreements and stabilities experienced in different countries will increase the United States’ foreign investments.

Inflation

In 2015, the country’s inflation rate remained unchanged at 0 percent (FED Federal Funds Rate, 2015). However, the rate dropped significantly from the previous year. The rate of inflation was 0.8 percent in the year 2014. Statistics also indicate that the rate of inflation has decreased significantly within the past ten years. However, analysts believe that the current statistics will change within the next few years. This is the case because inflation cannot be constant (FED Federal Funds Rate, 2015). As well, inflation is known to have various benefits towards the continued growth and performance of an economy (Bogusz, 2013). Inflation rate changes also make it easier for economic analysts to make accurate decisions and strategies. The approach can make it easier for a country to achieve its economic goals.

Experts have estimated that the country’s inflation rate might increase slightly to 1.4 percent in 2016. This will be followed by another increase to 2.3 percent in the year 2017. The rate of inflation will have increased to 2.54 by October 2018 (Projected annual inflation rate in the United States from 2008 to 2020, 2015). The projected inflation rate will rise further from 2018 to 2020. These changes will be triggered by global changes and production costs (Bogusz, 2013). Prices will be “expected to increase steadily in the coming three years due to the current changes in production, transportation, and business management” (Projected annual inflation rate in the United States from 2008 to 2020, 2015, para. 4). Economists believe that such changes will be essential towards promoting the country’s economic growth. This is the case because Customer Price Index (CPI) changes from one period to another.

Interest Rate

The United States’ Federal Reserve monitors, dictates, and reports interest rates in the country (FED Federal Funds Rate, 2015). This fact explains why “the term US interest rate refers to the Federal Funds Rate” (FED Federal Funds Rate, 2015, para. 4). Within the past four decades, the country interest rates have averaged 5.93 percent (Bogusz, 2013). The lowest interest rate was recorded in 2008 and the highest in 1980. The important thing is to observe that the Federal Reserve System (FED) monitors the nature of the market in order to set the most appropriate interest rates. Sometimes the Federal Reserve might withdraw or add funds in order to get the most appropriate interest rate. Any change in the country’s monetary policy will definitely alter the Federal Funds Rate (Projected annual inflation rate in the United States from 2008 to 2020, 2015).

Projections indicate that the Federal Funds Rate in the United States might remain unchanged within the next 1-3 years. This is the case because FED has not embraced various strategies to monitor the interest rate. However, some experts believe strongly that the country’s economy is responding positively. For instance, domestic spending in the nation has been increasing steadily. As well, some of the economic threats affecting the country have reduced significantly within the last two years (FED Federal Funds Rate, 2015). The country’s inflation rate has also remained low for the past few years (FED Federal Funds Rate, 2015). That being the case, FED is reconsidering these developments in order to ensure the interest rate is raised to the targeted level. This discussion indicates that the inflation rate might increase steadily within the next three years. However, it is unclear whether the Federal Reserve will support these changes.

Conclusion

Schmidt et al. (2015) argues that the United States is one of the largest economies in the globe. The country’s GDP has been growing steadily at a rate of 2.0 percent. It is notable that the country’s budget will increase in the next three years. The US Federal Reserve will also monitor the nation’s inflation and interest rates in order to implement the best monetary policies in the future. The country is also expected to engage in different foreign trade activities. However, these projections might change depending on the political and economic forces that will affect the country within the next three years.

Reference List

An Update to the Budget and Economic Outlook: 2015 to 2025. (2015). Web.

Bogusz, C. (2013). The Budget and Economic Outlook: Fiscal Years 2013 to 2023. New York, NY: CBO.

.FED Federal Funds Rate: American central bank’s interest rate(2015). Web.

HSBC Global Connections: Helping businesses grow internationally. (2015). Web.

Janda, K., Berry, J., Goldman, J., & Schildkrau, D. (2014). The Challenge of Democracy: American Government in Global Politics. Stamford, CT: Cengage Learning.

Projected annual inflation rate in the United States from 2008 to 2020. (2015). Web.

Schmidt, S., Shelley, M., & Bardes, B. (2015). American Government and Politics Today. Stamford, CT: Cengage Learning.

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