06/13/2002: "The Long-Term Outlook for the United States"
These are strange days. Even as the war on terror continues, we are facing the threat of all out war between nuclear powers Pakistan and India. Tensions remain high in the Middle East. The stock market continues to stall and the specter of overdependence on foreign manufactured goods has been raised. Even so, there are signs that the recent US economic downturn is behind us. Just nine months after one of the most horrifying events in American history, things are definitely looking up.
I must admit that the current situation makes for some very challenging forecasting. The near-term possibilities range from rather dire to very good. In the long term, I think we’ll see healthy growth. The foundation of our economy is strong, and that’s what will see us through. And on that note, let me tell you what my most recent look at the long-term prospects for the US economy turned up.
The United States’ economy is inexorably linked to the global marketplace and therefore respondent to economic fluctuations experienced by other nations around the world. Unprecedented growth and expansion during the 1990s was a product of those relationships as the US forged ahead with alacrity and determination to maintain its traditional leadership role.
In early 2001, however, evidence pointed to a slight economic downturn as numerous nations began facing a variety of difficulties. Officially noted as starting in March of that year, the slowdown was tragically exacerbated by terrorists’ actions on September 11. A sequence of events subsequently followed that led to a drop in consumer confidence and short-term financial difficulties across many industries.
Even so, the resiliency of the American spirit and the coalition garnered to fight terrorism produced a determination to overcome these trying circumstances and move positively toward the future. As a result, the US economy rebounded fairly quickly and momentum is such that this recovery is expected to continue to build, with notable growth projected over the long-term horizon (2001-2030).
The Perryman Long-Term Economic Forecast provides a synopsis of key economic projections for the US, Texas, and the state’s major metropolitan statistical areas (MSAs); I’ll hit some highlights for Texas and the major metros in future columns. Feel free to give us a call if you need more information, or visit our website at www.perrymangroup.com.
Here are some specifics pulled from the forecast. Real Gross Domestic Product (GDP in 1996 dollars) is predicted to grow by approximately 3.09% per annum over the long-term forecast horizon (2001-2030) expanding to $22.53 trillion at the end of 2030. Meanwhile, the Industrial Production Index is expected to climb at a CAGR of 3.17% during this 30-year period.
The US population is projected to top 360.80 million people by 2030, reflecting an annual growth rate of 0.82%. Employment will likely expand by 1.28% yearly, reaching 191.19 million by the end of the long-term horizon. Real personal income (RPI) is forecast to grow 3.12% per annum, attaining a total of $19.36 trillion (in 1996 dollars) by 2030. And the Consumer Price Index (CPI) is anticipated to increase by 2.24% per year, while the Producer Price Index (PPI) is expected to rise at an annual rate of 1.93% over the forecast horizon.
Without a doubt, the US economy stands poised for another sustained period of growth. However, the outlook is somewhat less favorable over the near-term horizon than in the late 1990s. Specifically, the war on terrorism and corresponding government deficit, the threat of war in other parts of the world, the slowdown in technology purchases, fear of inflation (and, hence, rising interest rates), and other changes in the US economy are negatively affecting growth prospects at this time. We do expect these conditions to abate over time, paving the way for enhanced expansionary trends for an extended period.