Chart of the week

Nearly nine years in, the expansion (slowly) continues

Real GDP growth during expansions

May 11, 2018 | 1 minute read
Real GDP growth during expansions
  • The current U.S. economic expansion reached the 107-month mark in May, making it the second-longest expansion since World War II.1 Given recent economic strength, many economists believe the current expansion could last as long as 120 months, which would match the longest post-WWII expansion.2
  • Since it began, however, the current expansion has been notable for delivering slower growth, with less inflation, than any other expansion in the post-WWII era.1,3 For example, real gross domestic product has grown by 21% since the beginning of the current expansion, compared to approximately 36% at this point in the 1991–2001 expansion.1
  • Many economists polled recently by The Wall Street Journal believe economic growth could pick up slightly in 2018 versus its pace in 2017.2 Yet 60% of those polled also believe the U.S. economy faces a greater risk of undershooting expectations than overshooting them in the next year.2
  • Even if economic growth gains steam in the second half of 2018, it’s important to remember that the U.S. economy’s maximum potential growth rate – the rate at which the economy can grow without overheating – is much lower than it was in previous recoveries. The Federal Reserve has gradually revised downward its estimates for potential GDP growth during the current expansion, from as high as 2.7% in 2011 to just 1.8% most recently.4
  • Looking forward, investors may continue to contend with an environment in which sources of growth and income remain at a premium, particularly as the current expansion continues to age.

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