Capital Markets: Observations & Insights

Better to Be Behind? ​ The Longest Expansion

• The output gap measures economic output relative to potential, with a lower output gap indicating more growth left in the cycle • While most major regions are at or near potential output, some, such as Japan and Europe, are further behind the U.S.

U.S. Output Gap

1%

4%

U.S.

Economy Above Potential

2%

0%

China

0%

Europe Japan

-1%

-2%

-4%

-2%

Economy Below Potential

(GDP / Potential GDP) - 1

-6%

-8%

1980

1982

1983

1985

1987

1989

1991

1993

1994

1996

1998

2000

2002

2004

2005

2007

2009

2011

2013

2015

2016

2018

Source: FactSet and Oxford Economics. Shaded regions indicate U.S. recessions.

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