The Federal Reserve’s Deputy Assistant Secretary for Macroeconomic Analysis Seth Carpenter said on Monday that the U.S. recovery continued at a moderate pace this year.
“Real GDP rose for a 15th straight quarter, U.S. businesses continued to add workers to their payrolls, and the unemployment rate dipped to a four-year low,” Carpenter said in a prepared statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association. “The U.S. economy is poised for stronger growth going forward.”
Since mid-2009, real GDP has grown at an average annual rate of just over two percent, largely led by the private sector. Private domestic final demand has outpaced real GDP growth, rising at an annual rate of 2.5 percent since mid-2009.
Carpenter said that while the economy will continue to face challenges, private forecasters expect economic activity to strengthen in the second half of the year, anticipating real GDP growth of 2.1 percent over the four quarters of the year—up from 1.7 percent last year.
Additionally, Carpenter said the sale of new and existing homes increased by 25 percent and seven percent, respectively, and while home inventory has expanded in recent months, the stock is relatively low compared to the current sales pace.
“This has helped lift house prices: the three major house price indices have been rising steadily for more than a year and are now at their highest levels since 2008,” Carpenter said. “Mortgage interest rates have moved sharply higher in the past two months, rising by nearly a full percentage point since early May. Despite rising house prices and the recent run-up in mortgage rates, housing affordability remains at a historically high level.”
Carpenter also pointed to the country’s progress in stabilizing its fiscal outlook, saying the Obama administration’s 2014 budget would replace the sequester and cut the deficit over the next 10 years. The “Mid-Session Review of the FY 2014 Budget” found that the deficit will fall from seven percent of GDP in 2012 to 4.7 percent of GDP in 2013, and it is expect to fall below three percent of GDP by 2017 and reach balance in 2019.
“Substantial progress has been made addressing the excesses and imbalances that triggered the financial crisis,” Carpenter said. “Household debt relative to income has fallen more than 20 percentage points and is near a 10-year low. Financial sector leverage is down, and credit is expanding. The housing sector is showing clear signs of improvement. The budget deficit has declined substantially as a share of the economy, and is projected to fall to around two percent of GDP over the next decade, putting our nation’s finances on a sustainable path for the longer term.”