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Growth prospects for the U.S. economy

  • Economics


Statements and Speeches 1 Growth Prospects for the U.S. Economy AAIM Management Association St. Louis, Missouri December 20, 2002 5.6 percent in the fourth quarter of 2001 to 5.9 percent four quarters hence. As we approach the end of 2002, the economy appears to have performed about as expected: If real GDP grows at about a 1¼ percent annual rate in the fourth quarter, and CPI inflation is about 2¼ percent at an annual rate for the quarter, as projected in the December 10 issue of the Blue Chip Economic Indicators, then economic growth in 2002 will be 2.9 percent, inflation will be 2.2 percent, and the unemployment rate will proba- bly average about 5.9 percent. In the forecasting business, last year’s projections are tantamount to hitting a bull’s-eye. If the economy is performing about as forecast, why are so many so glum these days? Part of the story is that forecasters were right for the annual average but wrong on the pattern over the year. At this time last year, policymakers and business leaders alike were struggling with the economic uncertainties associated with the fallout from the horrific events of September 11. The general expectation was that the economy would contract in the fourth quarter of last year and that economic growth in the first quarter of this year would be only a touch above zero. Then, the consensus view was, as the 9/11 shock wore off and as the expansionist policies put in place by the Fed and Congress took hold, the economy would be growing at about a 4 percent pace by the third and fourth quarters of this year. Actual events have played out a bit differently. After growing at a 2.7 percent annual rate in the fourth quarter of 2001, real GDP surged to a 5 percent growth rate in the first quarter of 2002. Those two pretty strong quarters were certainly a surprise in the wake of 9/11. The economy then I t is a pleasure to participate once again inan AAIM program. The end of the year isa traditional time to take stock of the stateof the economy a

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