U.S. and Kansas Economic Forecasts for 1994

Abstract

The National Economy

The U.S. economy in 1994 is expected to continue along the steady growth path that it has followed over the last two years. Following the recession in the early nineties, real GDP grew 2.6 percent in 1992 and 2.9 percent in 1993, and is expected to grow 2.7 percent in 1994. These growth rates compare quite favorably with the average growth rate exhibited over the last two decades, and should probably be interpreted as a sign of a reasonably healthy economy, although not a booming one. The main sources of the recent strength of the economy have been consumer spending, business investment in equipment, and residential construction, and these are expected to continue to be the main sources of growth again in 1994. The strength in consumer spending has been especially surprising since it has not been supported by strong personal income growth; this can partly be explained by increased consumer borrowing related to a partial return of consumers' confidence in the economy. The strongest segment of consumer spending is spending on durable goods. Rebounding from its cyclical low during the recession, real spending on consumers' durable goods grew 7 percent in 1992 and 7.3 percent in 1993, and such spending is expected to increase a further 6.7 percent in 1994. Real consumer spending on non­durable goods and services, which did not fall off as precipitously during the recession, have grown more slowly than spending on durable goods over the past two years, and are expected to grow 2.1 percent and 2.7 percent, respectively, in 1994.