A Case Study on United States

“A Macro Economic Review”

2018

Details of Macro Economic of United States

 Introduction to the Economy

TheUnited States is a highly developed mixed economy.It is the world's

largest economy by nominal GDP and net wealth and the second-largest
by purchasing power parity(PPP). It has world’s eight highest per capita
GDP (nominal) and per capita GDP (PPP) in 2018. The U.S. has the
most technologically powerful economy in the world and its firms are at or
near the forefront in technological advances;
especiallyin computers, pharmaceuticals, and medical, aerospace,
and military equipment. The U.S. Dollar ($) Currency is the currency most
used in international transactions and is the world’s most foremost reserve
currency and it is the official currency for the international trade all over
the world. The largest U.S. Trading partners are China, Canada, Mexico,
Japan, Germany, India, South Korea, United Kingdom, France and Taiwan.
The U.S. is the world’s largest importer and world’s second largest
exporter.
 The U.S. economy experienced a serious economic downturn during
the Great Recession, defined as lasting from December 2007 to June 2009.
However, real GDP regained its pre-crisis (late 2007) peak by 2011,
household net worth by Q2 2012, non-farm payroll jobs by May 2014, and
the unemployment rate by September 2015. Each of these variables
continued into post-recession record territory following those dates, with
the U.S. recovery becoming the second-longest on record in April
2018. Debt held by the public, a measure of national debt, was
approximately 77% of GDP in 2017.
According to the data of 2018 of World Bank and International Monetary
Fund (IMF) the current GDP of United States was at approx. $20.50 trillion
and in 2019 it is estimated to be at $21.439 trillion.
Now let us see the current macro-economic situation of United States in
detail.

 United States economic growth: -

 GDP (Gross Domestic Product): -
Gross Domestic Product (GDP) increased at an annual rate of 2.1
percent in the third quarter of 2019 (table 1), according to the "third"
estimate released by the Bureau of Economic Analysis. In the second
quarter, real GDP increased 2.0 percent.
In the second estimate, the increase in real GDP was also 2.1 percent.
With the third estimate for the third quarter, upward revisions to
personal consumption expenditures (PCE) and non-residential fixed
investment were offset by a downward revision to private inventory
investment.
 Real gross domestic income (GDI) increased 2.1 percent in the third
quarter, compared with an increase of 0.9 percent in the second
quarter. The average of real GDP and real GDI, a supplemental measure
of U.S. economic activity that equally weights GDP and GDI, increased
2.1 percent in the third quarter, compared with an increase of 1.4
percent in the second quarter.
The acceleration in real GDP in the third quarter reflected a smaller
decrease in private inventory investment and upturns in exports and
residential fixed investment, federal government spending, and state
and local government spending, and a larger decrease in non-residential
fixed investment.
The increase in real GDP in the third quarter reflected positive
contributions from federal government spending, residential
investment, exports, and state and local government spending that were
partly offset by negative contributions from non-residential fixed
investment and private inventory investment. Imports, which are a
subtraction in the calculation of GDP, increased.

 Agriculture, Industry sector and Service sector contribution to the

GDP: -
 The contributions of different industries to economic growth
(measured by GDP growth) paint a similar picture. Services have been
the key pillars of GDP growth since 2014—when the economic recovery
started gaining momentum. As noted earlier, smaller services industries,
such as information, and educational services, health care, and social
assistance, gained prominence for their contribution to growth as well.
A closer view of 2018 shows that the impressive annual real GDP
growth of 2.9 percent was bolstered by strong contribution from growth
in the professional and business services (0.6 percentage points),
followed by the manufacturing; trade, transport, and warehousing; and
information industries (close to 0.5 percentage points each).
 However, cost of labour, slower global and trade growth impacting
the US economy, and possible supply chain disruptions because of
uncertainties around trade conflicts may reverse the manufacturing
revival.

 Population: -

Top 10 States in Percent Growth, 2018 to 2019

Geographic April 1, 2010 Percent

Rank Area (Estimates Base) July 1, 2018 July 1, 2019 Growth
1 Idaho 1,567,657 1,750,536 1,787,065 2.1%
2 Nevada 2,700,677 3,027,341 3,080,156 1.7%
3 Arizona 6,392,288 7,158,024 7,278,717 1.7%
4 Utah 2,763,891 3,153,550 3,205,958 1.7%
5 Texas 25,146,091 28,628,666 28,995,881 1.3%
6 South Carolina 4,625,366 5,084,156 5,148,714 1.3%
7 Washington 6,724,540 7,523,869 7,614,893 1.2%
8 Colorado 5,029,319 5,691,287 5,758,736 1.2%
9 Florida 18,804,564 21,244,317 21,477,737 1.1%
10 North Carolina 9,535,751 10,381,615 10,488,084 1.0%
 The above table shows the data of the top 10 states of the United states
which has contributed to the population growth in the country.
The nation’s population was 328,239,523 in 2019, growing by 0.5%
between 2018 and 2019, or 1,552,022 people. Annual growth peaked at
0.73% this decade in the period between 2014 and 2015. The growth
between 2018 and 2019 is a continuation of a multiyear slowdown since
that period.
Between 2018 and 2019, natural increase was 956,674, reflecting 3,791,712
births and 2,835,038 deaths.
Natural Increase Drops Below 1 Million for the First Time in Decades
Due to Fewer Births and More Deaths.
The following table shows the % difference between the population of
male and female in the United States.

Age
Age Males Male Females Female Total Age Group's
Grou % % Group share of
p Population total
population

0-14 31,078,969 51.11% 29,732,002 48.89% 60,810,971 18.37%

15-24 22,157,053 50.93% 21,344,600 49.07% 43,501,653 13.14%

25-54 65,113,056 50.31% 64,316,748 49.69% 129,429,80 39.10%

4

55-64 20,751,951 49.16% 21,459,462 50.84% 42,211,413 12.75%

65+ 24,684,987 44.84% 30,363,819 55.16% 55,048,806 16.63%

Total
Population
Males Male % Females Female % (2020)

163,786,016 49.48% 167,216,631 50.52% 331,002,651

 Poverty: -

The official poverty rate in 2018 was 11.8 percent, down 0.5
percentage points from 12.3 percent in 2017. This is the fourth
consecutive annual decline in poverty. Since 2014, the poverty rate has
fallen 3.0 percentage points, from 14.8 percent to 11.8 percent.

In 2018, for the first time in 11 years, the official poverty rate was
significantly lower than 2007, the year before the most recent recession.

In 2018, there were 38.1 million people in poverty, approximately 1.4

million fewer people than 2017.

Between 2017 and 2018, poverty rates for children under age 18
decreased 1.2 percentage points from 17.4 percent to 16.2 percent.
Poverty rates decreased 0.4 percentage points for adults aged 18 to 64,
from 11.1 percent to 10.7 percent. The poverty rate for those aged 65
and older (9.7 percent) was not statistically different from 2017.

From 2017 to 2018, the poverty rate decreased for non-Hispanic

Whites; females; native-born people; people living in the Northeast,
Midwest, and West; people living inside metropolitan statistical areas
 and principal cities; people without a disability; those with some college
education; people in families; and people in female householder
families.

Between 2017 and 2018, people aged 25 and older without a high
school diploma was the only examined group to experience an increase
in their poverty rate. Among this group, the poverty rate increased 1.4
percentage points, to 25.9 percent, but the number in poverty was not
statistically different from 2017.

 Unemployment: -
 The unemployment rate (U-3), measured as the number of persons
unemployed divided by the civilian labour force, rose from 5.0% in
December 2007 to peak at 10.0% in October 2009, before steadily
falling to 4.7% by December 2016 and then to 3.5% by December 2019.
As per the recent report given the Bureau of Labour Statistics of U.S.
Government. The United States unemployment rate held steady at 3.5
percent in December 2019, remaining at the lowest level since 1969
and in line with market expectations.The number of unemployed
people decreased by 58 thousand to 5.75 million while employment
rose by 267 thousand to 158.80 million. The labour force participation
rate was unchanged at 63.2 percent. Unemployment Rate in the United
States averaged 5.73 percent from 1948 until 2019, reaching an all-time
high of 10.80 percent in November of 1982 and a record low of 2.50
percent in May of 1953.

As of June 2018, approximately 128.6 million people in the United

States have found full-time work (at least 35 hours a week in total),
while 27.0 million worked part-time.There were 4.7 million working
part-time for economic reasons, meaning they wanted but could not
find full-time work, the lowest level since January 2008.
The Congressional Budget Office estimated that the U.S. was
approximately 2.5 million workers below full employment as of the end
of 2015 and 1.6 million at December 31, 2016, mainly due to lower
labour force participation.[18] As of May 2018, there were more job
openings (6.6 million) than people defined as unemployed (6.0 million)
in the U.S.
In September 2019, the U.S. unemployment rate dropped to 3.5%,
near the lowest rate in 50 years.
  Inflation: -

The US consumer price inflation rate climbed to 2.3 percent year-

on-year in December 2019 from 2.1 percent in the previous month and
in line with market consensus. That was the highest rate since October
2018, boosted by a sharp rebound in energy costs (3.4 percent v/s -0.6
percent in November). Food inflation, however, eased to 1.8 percent
from 2.0 percent. Additional price increases were recorded for medical
care commodities, medical care services and shelter. The core inflation
rate, which excludes volatile items such as food and energy, was
unchanged at 2.3 percent, also in line with market forecasts.

Average Inflation Total Inflation $1 in 2018 →

Category
(%) (%) 2019

Food and
1.84 1.84 1.02
beverages
 Average Inflation Total Inflation $1 in 2018 →
Category
(%) (%) 2019

Housing 2.89 2.89 1.03

Apparel -1.28 -1.28 0.99

Transportation -0.28 -0.28 1.00

Medical care 2.83 2.83 1.03

Recreation 1.28 1.28 1.01

Education and
0.73 0.73 1.01
communication

Other goods and

2.03 2.03 1.02
services

From 2018 to 2019, consumer prices for all items rose 2.3 percent.

Over that period, food prices increased 1.8 percent, a slightly larger
percentage increase than the 12-month increase of 1.6 percent in
2018. Food at home prices increased 0.7 percent in 2019, continuing a
trend of modest increases, as prices rose 0.6 percent in 2018 and 0.9
percent in 2017.
During 2019 the annual inflation rate hovered between a low of
1.52% in February and 2.00% (which occurred in April). But the range
was actually much smaller. From May through October the high was
1.81% in July and the low was 1.65% in June. But in November the
Annual Inflation Rate jumped up to a new high for the year at 2.05%
once again crossing above the 12 month moving average indicating a
shift toward increasing inflation at least in the short term.
 Natural Resources: -

Mining is a primary industry in the United States. In 2015, total metal

and coal reserves in the country were estimated to be $109.6
billion. The United States is the leading producer of coal and has been
for decades, and it accounts for just over 30% of global coal reserves
and has huge amounts of timber. Total natural resources for the United
States are approximately $45 trillion, almost 90% of which are timber
and coal.
The United States is one of the largest global producers of the metals
and minerals powering manufacturing – from precious metals such as
gold and silver to copper, nickel, iron, lead, uranium, bauxite, mercury,
tungsten and zinc. The nation is also the leading producer and
consumer of phosphates, a key ingredient in fertilizers used in
agricultural production.
 Forests are a treasured and unique resource endowment. The United
States has over 750 million acres (roughly three million square
kilometres) of forest lands – around two-thirds of which is timberland.
U.S. timber production supports a wide range of industries from paper
production to construction.
The nation's land area comprises nearly 2.3 billion acres (around 9.3
billion square kilometres) – nearly half of which are agricultural lands.
As a global leader in agricultural innovation, the United States is the
world’s largest producer and exporter of food, offering a wide range of
opportunities for food and processing agribusiness.

 Items Export and Import: -

Exports: -
Exports from the US rose USD 1.4 billion from the previous month to USD
208.6 billion in November 2019, mainly boosted by a USD 0.6 billion
increase in shipments of capital goods, in particular drilling and oilfield
equipment and civilian aircraft, and a USD 0.5 billion advance in consumer
goods sales, such as jewellery and gem diamonds. In addition, purchases of
automotive vehicles, parts, and engines were up USD 0.4 billion, as well as
exports of services. On a non-seasonally adjusted basis, goods exports to
China jumped 13.7 percent and those to Brazil climbed 5.5 percent.

Capital goods decreased $2.7 billion. Civilian aircraft decreased $2.3 billion.
Automotive vehicles, parts, and engines decreased $0.8 billion. Passenger
cars decreased $0.4 billion. Automotive parts and accessories decreased
$0.3 billion. Consumer goods decreased $0.6 billion. Pharmaceutical
preparations decreased $0.4 billion. Net balance of payments adjustments
increased $0.1 billion. Exports of services decreased $0.2 billion to $69.9
billion in April. Travel (for all purposes including education) decreased $0.1
billion. Maintenance and repair services decreased $0.1 billion.

Imports: -
 Imports to the US dropped USD 2.5 billion from a month earlier to
USD 251.7 billion in November 2019, the lowest level since October
2017, led mostly by drop in purchases of capital goods (down USD 1.2
billion) such as civilian aircraft and computers. Also, imports of
consumer goods fell USD 1 billion on the back of cell phones and other
household goods, and artwork and other collectibles; while industrial
supplies and materials purchases decreased USD 0.6 billion. Crude oil
imports tumbled to 166.4 million barrels, the lowest since February
1992. In contrast, purchases of automotive vehicles, parts, and engines
were up USD 1.1 billion; and imports of services rose USD 0.4 billion.

Capital goods decreased $1.7 billion. Semiconductors decreased

$0.9 billion. Civilian aircraft engines decreased $0.4 billion. Consumer
goods decreased $1.1 billion. Gem diamonds decreased $0.7 billion.
Automotive vehicles, parts, and engines decreased $1.0 billion.
Passenger cars decreased $0.6 billion. Other goods decreased $0.8
billion. Industrial supplies and materials decreased $0.6 billion. Net
balance of payments adjustments decreased less than $0.1 billion.
Imports of services decreased $0.3 billion to $49.0 billion in April.
Transport decreased $0.3 billion.

 Currency Exchange Rate: -

Top USD Exchange Rates
EUR GBP CAD INR MXN AUD CNY MYR COP

1 USD 0.906 0.76494 1.3146 71.335 18.786 1.4647 6.9368 4.0651 3364.2
9
Inverse: 1.102 1.30729 0.7606 0.0140 0.0532 0.6827 0.1441 0.2459 0.0003
5
2020-01-26 04:31 UTC

Standing on Its Own as the World's Reserve Currency

As a result of the Bretton Woods Agreement, the U.S
dollar was officially crowned the world's reserve currency, backed by
the world's largest gold reserves. Instead of gold reserves, other
countries accumulated reserves of U.S. dollars.
The U.S. dollar is also an important factor in the foreign exchange
rate market for other currencies, where it may act as a benchmark or
target rate for countries that choose to fix or peg their currencies to
the USD's value. China, for instance, has long had its currency, the
yuan or renminbi, pegged to the dollar, much to the disagreement of
many economists and central bankers. Quite often countries will fix
their exchange rates to the USD to stabilize their exchange rate, rather
than allowing the free (forex) markets to fluctuate its relative value.
In addition, due to the U.S. dollar's global acceptance, it is used by
some countries as an official currency, in lieu of a local currency, a
practice known as dollarization. The U.S. dollar also may be widely
accepted in other nations, acting as an informal alternative form of
payment, while those nations maintain their official local currency.