The US economy started the current quarter with strong momentum, as was evidenced by the data to hand on retail sales and international trade, as well as construction. The rise in industrial production is also particularly positive. After a weak start to the year, the world’s largest economy therefore appears to have returned to its growth path again. Our economic growth forecast for this year is unchanged at around two percent. The situation in the individual economic sectors shows that the US central bank (Fed) definitely has scope at present to raise interest rates. As in previous years, the absence of growth in the first quarter fuelled concerns about the robust nature of the US economy. A look at the last ten years shows that the United States has once again assumed the role of growth driver in the group of developed nations, even after the global financial and economic crisis. US economic output, for example, is meanwhile 12 percentage points higher than before the outbreak of the crisis. The euro area on the other hand can only report growth of around two percent. Private consumption, which has recorded an increase of almost 15 percent for this period, remains the key driver in the US.
We expect robust consumption dynamics in the current quarter. In short, private consumption alone is likely to make a 1.8 percentage point contribution to economic growth this year. The Fed chairmen are also expected to take the dampening influence of demographic development on consumption into account in their decision. Annual population growth is currently only just over 0.8 percent compared with the 90s, when the US population grew by an annual average of around 1.1 percent. A return to growth in consumption of around 3.7 percent, which was standard at that time, would therefore only be feasible if per capita consumption was to grow at an even stronger rate than in the 90s. In addition, consumption dynamics in the US at that time was supported by a marked increase in private indebtedness, which is no longer desired under any circumstances. Quite the contrary: given that private household debt relative to disposable income is still more than 100 percent, a further reduction of this level is envisaged. Stronger growth in per capita consumption over the previous year’s level of already 2.2 percent would hardly be compatible with ongoing deleveraging. Other growth drivers are housing construction and the housing market, where the extremely low interest rates are driving the demand for real estate. Although tighter lending practises are curbing the purchase of owner-occupied houses and apartments, there has been a significant acceleration in the momentum for lending with regard to rental real estate.
All in all, the economic cycle in the US is already well advanced but is impacted beyond this by the muted global economic momentum. The meanwhile very good situation on the labour market, however, is generating robust domestic demand, which also benefits housing construction. Overall, current growth is built on a solid foundation, given the perceptible reduction in private indebtedness. The decision-makers at the Federal Reserve are nevertheless likely to take a critical view of the fact that lending for multi-family construction has recently reached double-digit growth rates. The large number of building permits already issued provides no indication of a slowdown. The forthcoming Brexit referendum poses a risk to the US economy, given the very close trade links it holds with the entire European Union. Even so, we anticipate an orderly process if the United Kingdom votes in favour of leaving, so that the US economy is unlikely to be affected much in the short term.