Forces Moving the Economy

Here is what economists at Economy.com believe will drive the economy into next year. They say the unleashing of business pent-up demand will ensure that the U.S.economy’s recovery will continue, but the unwinding of consumer spent-up demand will ensure that it won’t come roaring back. The principal impetus for near term growth will be pressure on businesses to replace their rapidly depreciating stock of information technology and to replenish their depleted inventories. The principal constraint on growth will be weaker vehicle and housing demand, as households have been enticed to make purchases well before they would have otherwise given perceived once-in-a-lifetime deals.

The implications of this is that while the economic expansion is taking root, it will be very modest, at least by the standards of business cycles of the past half century. Unemployment will fall and inflation will ultimately accelerate, but only slowly. The sources of growth will shift from households to businesses. The U.S.economy will remain especially vulnerable to the vagaries of global events.

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