INDIANAPOLIS. The U.S. economy is a chair that is balancing on only one of four legs, in the words of FTR economic expert Bill Witte, and that “one leg” is household consumer spending.
"It's a big leg, household consumption; but if you chop it away, the chair falls over," he emphasized in a presentation here during the annual transportation conference hosted by research firm FTR, as business investment and exports are down while government spending is “lackluster” at best.
“Consumption I think is a little too exuberant,” Witte stressed, adding that there are “several things to watch” in terms of the “one leg” now propping up the U.S. economy becoming unstable.
“If real income growth slows down, we’re in trouble,” he explained. “If consumer sentiment falls or if consumers stop buying cars – we’re on track to sell 17 million [light vehicle] units this year – that’s another bad sign.”
Yet Witte also noted that there are “basic problems” trying to make predictions about the U.S. economy right now as there are a lot of things going on that are “not typical” of previous economic cycles.
“Labor productivity growth is terrible; there’s been a decline in the overall labor participation rate; there’s weakness in business investment; housing starts are good but they are not where they should be,” he said. “The stock market is also high by historical standards. So thee lots of reasons to be very caution here.”
At this moment, Witte is projecting a little over 2% gross domestic product (GDP) growth for the U.S. to occur from the third quarter of this year through the end of 2017: in his words the continuation of the current “status quo” economic recovery and expansion.
“My best guess is that we’re going to chug along at 2% unless something happens,” he added.
