Economic Outlook, February 2014

Jeffrey Lacker

Speech from Federal Reserve Bank of Richmond

Abstract: Although recent data releases have some forecasters predicting GDP growth of around 3 percent later this year, my own projection is more modest, just a little above 2 percent. One reason for this projection is greater caution on the part of both lenders and consumers. In addition, policy uncertainty has led some businesses to postpone possible investments. Although residential investment has increased significantly, it makes up only a small portion of GDP. A long-run increase in overall output requires a substantial increase in labor productivity growth or in employment growth. Both productivity and employment growth are likely to remain close to the current trend of 1 percent. Conditions in the labor market have improved recently, which is consistent with the FOMC's reduction in the pace of asset purchases. Despite factors that may contribute to slower economic growth, I still see room for optimism regarding our fundamental prospects.

Date: 2014-02-04
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