As the United States looks ahead to the next few years, there are several key economic indicators that will be worth keeping an eye on. Experts like Kavan Choksi say these indicators can provide valuable insights into the state of the economy and can help policymakers and investors understand the direction of the economy and make informed decisions.
Gross Domestic Product (GDP)
Gross domestic product (GDP) is a measure of the total value of goods and services produced within a country’s borders. It is considered one of the most important indicators of a country’s economic performance.
Going into 2023, the US GDP is expected to continue growing, albeit at a slower pace than in previous years. The Congressional Budget Office (CBO) projects that the US GDP will grow by an average of 2.4% per year over the next few years, down from the 3% average growth rate seen in the post-World War II period.
The unemployment rate is a measure of the percentage of the labor force that is currently without work but actively seeking employment. It is an important indicator of the health of the labor market and the overall economy.
Going into 2023, the US unemployment rate is expected to continue improving, although it may remain elevated relative to pre-pandemic levels. The CBO projects that the unemployment rate will average around 5% over the next few years, down from the peak of around 14% seen during the COVID-19 pandemic.
Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation and avoid deflation in order to keep the economy running smoothly.
Going into 2023, the US inflation rate is expected to remain relatively low, with the Federal Reserve targeting an inflation rate of around 2% per year. Inflation has been relatively tame in recent years, with the COVID-19 pandemic and low energy prices helping to keep a lid on prices.
Interest rates play a key role in the economy, as they impact the cost of borrowing and can influence investment and spending decisions. The Federal Reserve sets short-term interest rates, while long-term rates are determined by market forces.
Going into 2023, interest rates are expected to remain low, as the Federal Reserve has indicated that it plans to keep rates lowered until the economy has fully recovered from the COVID-19 pandemic. Low-interest rates can stimulate economic growth by making it easier for businesses and individuals to borrow money, but they can also lead to increased debt and asset price inflation.
The trade balance is the difference between a country’s exports and imports. A positive trade balance, or trade surplus, indicates that a country is exporting more than it is importing, while a negative trade balance, or trade deficit, indicates the opposite.
Going into 2023, the US trade balance is expected to remain negative, with imports continuing to outpace exports. The US has a long history of running trade deficits, which can be influenced by a range of factors, including the relative strength of the US dollar, the cost of production, and trade policies.
As the US looks ahead to the next few years, there are several key economic indicators that will be worth keeping an eye on. These indicators can provide valuable insights into the state of the economy and can help policymakers and investors understand the direction of the economy and make informed decisions.