The U.S. economy has hit its stride, with GDP on track to grow 3% over the next two years, according to a report from TD Economics.
“The headline data points to sturdy growth in the quarters ahead,” said TD Chief Economist Craig Alexander. “With household incomes supported by tax cuts and businesses incented to invest, real GDP looks set to grow by 3.0% in 2011.”
In particular, TD Economics pointed to strong consumer purchases in the fourth quarter of 2010, particularly of big-ticket items such as cars and furniture. Household balance sheets are stabilizing, TD Economics said.
And the employment picture is improving, with more than 200,000 private jobs created in February, the first time that figure topped 200,000 since April 2010. While it will take a long time for the 8.4 million jobs that were lost in the Great Recession to be restored, at least the nation is on the right path, TD Economics said.
“Combined with the fiscal and monetary stimulus currently in place, it appears the stars are aligned for consumers to play an important role in supporting economic growth over our forecast horizon,” Alexander said.
However, there are risks, namely the continued weal U.S. housing market, the future of U.S. fiscal policy, the European debt crisis, rising crude oil prices and the earthquake and tsunami in Japan.
“Just as consumer spending appears to be regaining its footing, households are getting hit by higher prices at the pump,” Alexander said. As consumer spending makes up nearly 70% of U.S. economic activity, the 15% jump in oil prices could shave 0.2% off consumer spending in the near term, he estimates.
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