Nearly nine years in, the expansion (slowly) continues
Real GDP growth during expansions
May 11, 2018 | 1 minute read
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.