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FED: Powell - Productivity Burst Probably Raises Potential Output In Near-Term

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USEM BulletFederal ReserveCentral Bank NewsEmerging Market NewsBulletMarketsFixed Income BulletsForeign Exchange BulletsNorth America
  • Q: The US has had the fastest recovery of all the major economies. Do we understand why that is and do you think we’re learning something now about the speed limit for the economy?
  • Powell: US outperformance down to three things: structural differences (more flexible labor market, highly developed capital markets, innovation culture, rule of law), a big increase in the population and a really significant burst in productivity. Some of those productivity factors suggest a one-time event (automating functions in retail) whereas technological developments might give us years and years of productivity. We don’t know how long this burst will be sustained for but I never expected to see it this high for this long. Our staff are marking up potential growth estimates for now and taking some signal about the future. It probably does raise the level of potential in the relatively near-term. 
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  • Q: The US has had the fastest recovery of all the major economies. Do we understand why that is and do you think we’re learning something now about the speed limit for the economy?
  • Powell: US outperformance down to three things: structural differences (more flexible labor market, highly developed capital markets, innovation culture, rule of law), a big increase in the population and a really significant burst in productivity. Some of those productivity factors suggest a one-time event (automating functions in retail) whereas technological developments might give us years and years of productivity. We don’t know how long this burst will be sustained for but I never expected to see it this high for this long. Our staff are marking up potential growth estimates for now and taking some signal about the future. It probably does raise the level of potential in the relatively near-term.