Time to Go to the US!!!

Output gap estimates the spread between actual economy growth and its potential level. Potential level can be achieved if all resources in the economy are utilized at their long-term sustainable rate. Global Financial Crisis started negative output gap and it was until recently the gap begins to close in most advanced economies, which provides evidence of increasing demand and strengthening economy. Closing gap also theoretically indicates full employment is being approached or has been achieved, yet most economies are far from overheating.

US has slightly passed full capacity and the gap is closing rapidly. A decrease in spare capacity can reduce the competition pressure on supply side and lead to an increase in price level, allowing more profitability for corporates. It is also expected that peaks are not coming soon, i.e. corporates have time to embrace the economy boon.

Time to Go to the US!!!

Consumer spending growth in September achieved 1.0%, the fasted pace since 2009. This GDP component accelerated in November again last year while shipments of key capital goods orders increased for 10 consecutive months. In aggregate statistics and dollar term, consumer spending increased to $12,027.89 billion in Q4 2017 from $11,916.58 USD billion in Q3. 

Furthermore, according to Paul Ryan, average US family of four will save $1,182 in 2018 on taxes following the $1.5 trillion tax cut package approved by the Congress. Increased disposable income and enhanced consumer confidence, as the marginal propensity to consume picked up, will stimulate customer demand and spending, leading to a promising demand side.

Time to Go to the US!!!

The growth impulse in advanced economies has improved from -1% in early 2016 to 0.75% now. World Bank forecasts that growth in advanced economies to be 2.2% in 2018 while major central banks continue tightening, whereas US economy is estimated to grow at 2.3% in 2017, accelerate to 2.5% in 2018 and then moderate to 2.1% in 2019 and 2020 due to stronger private investment. A rising tide lifts all boats. This positive sign suggests all industries will on average enjoy over 2% increase in revenue.

To extend long-term growth potential, World Bank also claims it is a great opportunity to invest in human and physical capital to increase productivity, and invest in innovative ability, the driver and catalyst of long-term economy vigor. Your participation as foreign investment can contribute too!

Source: World Bank