Capital Markets Autumn 2020

IV

Mind the Output Gap The Economy

• The U.S. economy is operating substantially below its potential, implying significant room is left in the expansion in our view

I

Large Output Gap Implies A Lot of Growth Left

II

Recession U.S. Output Gap

3%

2%

Less Sustainable Growth Remaining

III

1%

0%

-1%

IV

-2%

-3%

-4%

More Sustainable Growth Remaining

-5%

GDP / Potential GDP -1

V

-6%

-7%

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

VI

Source: Congressional Budget Office. The output gap indicates the difference between the actual output of an economy and the maximum potential output (the economy’s maximum sustainable output with underlying inputs including the natural rate of unemployment, various measures of the labor supply, capital services, and productivity) of an economy .

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