Strategy

Conference Board Predicts Best Year Since 1984

Forecasts U.S. growth of 5.9 percent and global growth about 5 percent for 2004.
Stephen TaubFebruary 5, 2004

The latest economic forecast from The Conference Board predicts that in 2004, the U.S. and world economies will record their best years since 1984.

The board forecasts U.S. growth of 5.9 percent and global growth of about 5 percent.

“Rapid top-line growth and bottom-line productivity benefits mean that near-term profit growth will be huge,” wrote Conference Board executive vice president and chief economist Gail D. Fosler in the latest issue of the board’s newsletter StraightTalk. “The U.S. economy and world economies continue in the virtuous phase of a strong economic cycle in which accelerating growth generates productivity and profits and rising employment creates a new phase of income-driven consumer spending.”

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And thanks to the acceleration in corporate profits and the decline in the unemployment rate, business investment might even exceed the gains of the early 1990s, especially in manufacturing and technology, according to the forecast.

The Conference Board forecasts inflation of 2.2 percent this year and 3.2 percent in 2005, a big year-over-year jump. It also expects real consumer spending to grow by 5.3 percent this year and 4.5 percent in 2005.

One caveat, according to the board: Rapid growth could undermine cost competitiveness if the falling unemployment rates pushes wages up, high and rising commodity prices add to other non-labor costs, and fixed cost structures begin to rise. In addition, prices, costs, and interest rates are likely to rise suddenly, possibly without warning, creating future instability in the United States and in the rest of the world.