Economy Running Full Throttle for 1st Time in a Decade, Says WSJ

Washington, DC, November 30, 2017-The U.S. economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year, the Wall Street Journal reports in an article called “Economy Hits Full Stride For First Time in 10 Years” by Ben Leubsdorf.

“Total economic output in the third quarter was slightly above the maximum sustainable level of output as estimated by the nonpartisan Congressional Budget Office.

“This is a measure of the economy’s potential to produce goods and services based on the supply of people working and how productive they are. In downturns actual output drops below potential and slows inflation. In advanced stages of expansions output can exceed potential and cause the economy to overheat.

“It was the first time actual gross domestic product had exceeded potential GDP since the fourth quarter of 2007, suggesting the nation’s economic resources are being used efficiently. An acceleration in growth at this point could generate overheating that produces financial excess or long-elusive consumer price pressures.

“When the recession that began in December 2007 reached its nadir in mid-2009, GDP was more than 6% below its maximum sustainable level as estimated by CBO. Revised GDP data released Wednesday by the Commerce Department confirmed the so-called output gap turned positive this summer, joining the lowest unemployment rate in nearly 17 years as evidence of renewed health in the economy.

“Wednesday’s report from the Commerce Department showed GDP, a broad measure of the goods and services produced in the U.S., expanded at a 3.3% annual rate in the third quarter, adjusted for inflation and seasonality. It was the strongest quarter in three years, and an upward revision from the government’s initial estimate of 3.0% growth.

“A key measure of business earnings strengthened last quarter as well. The Commerce Department said after-tax corporate profits, without inventory valuation and capital consumption adjustments, rose 4.9% in the third quarter from the prior period after falling 2.0% in the second quarter.

“Compared with a year earlier, profits were up a solid 10.0% in the third quarter.

“Looking ahead, economists expect the year will end on solid footing. Forecasters at Macroeconomic Advisers on Wednesday projected a 2.5% GDP growth rate for the fourth quarter.”