ECONOMY - Sustained Upward Momentum?

"Can the U.S. economy sustain its surprising momentum in the new year?" PBS NewsHour 12/23/2014

Excerpt

SUMMARY:  The U.S. economy’s summer surge was even stronger than first estimated, expanding at an annual rate of 5 percent from July to September -- the best performance since the summer of 2003.  Judy Woodruff talks to Nariman Behravesh, chief economist at IHS, about the impressive recent growth and whether it will last.

JUDY WOODRUFF (NewsHour):  Let’s take a closer look now at what was behind today’s strong numbers on the economy and impressive recent growth.

For that, we turn to Nariman Behravesh.  He is the chief economist at IHS.  It’s an economic forecasting and research firm.

Nariman Behravesh, thank you very much.

So what’s behind this?  What’s driving this?

NARIMAN BEHRAVESH, IHS Global Insight:  Well, the good news is, it’s fairly broad-based.

The revision that we saw today was mostly due to two factors, consumer spending, which was revised up in large part because of re-estimates of higher spending on health care.  But that wasn’t the only thing.  Capital spending was also revised up quite considerably.  So it’s a fairly broad-based upward revision in GDP.

The good news is, as you said at the outset of the program, that there’s a lot of momentum in the U.S. economy and that is going to keep us going for a while.

JUDY WOODRUFF:  Well, it seems like just yesterday we were being told that — that the economy wasn’t picking up.

So does this represent a sudden turnaround or were the fundamentals there all along?

NARIMAN BEHRAVESH:  No, the fundamentals were definitely there all along.  Let’s just look at the consumer for the moment.

If you look at things like employment growth, very strong, the strongest in over 10 years, and this is consistently throughout 2014.  Consumer finances in great shape.  Consumers’ debt levels relative to take-home pay are the lowest since 2002.

That drop, big drop in gasoline prices, it’s like an $80 billion to $100 billion tax cut for consumers.  That’s money right into their pockets.  And so all of these are good news and they’re more sort of fundamental changes.  These are not flukes.

These are sustainable changes that will keep consumer spending growth going for some time.