Spring turns to summer in America, and once again, the mown-grass scent of economic optimism is in the air. An 11 per cent annual rise in house prices and a boom in the stock market does that to people. Higher asset prices are not much good by themselves – growth in incomes, jobs and activity is plodding – but markets seem to be sustaining the economy through the worst of tax rises and government spending cuts. Consumer confidence has not been this high for five years.
It has become routine, at about this time of year, to predict that the US economy is on the mend – only for that recovery to swiftly rot away. In the second quarter of 2010, the median forecast for US growth in 2011 was 3.1 per cent, and the Fed was gunning for 3.9 per cent. The actual outcome was a depressing 1.8 per cent and the pattern of the next two years was similar.
To make the following prediction, therefore, is vainglorious, like a boxer bragging about the fourth round knockout he will inflict on an undefeated foe. I think next year is the year. In 2014, the US economy will grow by more than 3 per cent.