Thank you for inviting me to read and subscribe to your Substack newsletter! Your Economic Map is a is clear and systematic way for interpreting this confusing market! I may argue that in a productivity accelerating scenario, the real GDP growth can be closer to the long-term potential of 2 to 2.5%, especially you have a PCE growing at 4% (personal consumption is almost 70% of US GDP). Look forward to reading more stories and the growth of your newsletter!
You are absolutely right! From where we currently stand in the US economy, I imagine the Productivity Acceleration to take place if we see inflation fall dramatically from current levels, triggered by decline in consumer demand. This would mean PCE services would fall from its current levels of 8.3% to 4% (its long term growth rate) or perhaps even lower. The Feds would lower rates to avoid a recession. And if we do avoid a recession, then we pivot to Productivity Acceleration. Right before we step into Productivity Acceleration. we may witness a period of time, where we have barely positive economic growth depending on the contraction of spending (but no recession). Unfortunately, the Economic Scenario Map that I have built does not capture this nuance. But I fully agree with your agreement once we are in full-fledged acceleration mode. Thank you for asking such a great question.
Thanks for sharing your thought process! It will be interesting to watch how our economy unfolds as interest rates and inflation nay stay higher for longer! It is good to be protected!
Thank you for inviting me to read and subscribe to your Substack newsletter! Your Economic Map is a is clear and systematic way for interpreting this confusing market! I may argue that in a productivity accelerating scenario, the real GDP growth can be closer to the long-term potential of 2 to 2.5%, especially you have a PCE growing at 4% (personal consumption is almost 70% of US GDP). Look forward to reading more stories and the growth of your newsletter!
You are absolutely right! From where we currently stand in the US economy, I imagine the Productivity Acceleration to take place if we see inflation fall dramatically from current levels, triggered by decline in consumer demand. This would mean PCE services would fall from its current levels of 8.3% to 4% (its long term growth rate) or perhaps even lower. The Feds would lower rates to avoid a recession. And if we do avoid a recession, then we pivot to Productivity Acceleration. Right before we step into Productivity Acceleration. we may witness a period of time, where we have barely positive economic growth depending on the contraction of spending (but no recession). Unfortunately, the Economic Scenario Map that I have built does not capture this nuance. But I fully agree with your agreement once we are in full-fledged acceleration mode. Thank you for asking such a great question.
Thanks for sharing your thought process! It will be interesting to watch how our economy unfolds as interest rates and inflation nay stay higher for longer! It is good to be protected!