Table of Contents
Introduction
In this paper, it will be elucidated how the U.S. economy is likely turn up in the coming 12 months. Apart from this, emerging markets’ development is quite evident. In such scenario, it is crucial to understand which industries will outperform across various emerging markets.
Discussion
Question 1
As per the main economic indicators, definitely the outlook for U.S. economy is quite robust. GDP is one of the most integral indicators to showcase production output of U.S. Even though the expectation of GDP growth is within 2 to 3 percent it has yet not reached the ceiling. Unemployment will actually continue at the same pace. The level of deflation and inflation will be kept under control. President Trump also promised the American civilians to increase homeland’s economic growth by almost 4 percent. On the other hand, several workers are still not full-time employees (Swanson, 2017). As a result, they are in part-time employment genre. Job growth is quite low in both food and retail service industries. Even it can be witnessed in some cases that few people once lost their high-paying jobs they never got another chance to get back such types of work. It has ultimately led to structural unemployment. Thus, it can make the unemployment rate look apparently low but in reality U.S. will suffer from the same more sparingly.
Inflation will be more than 1.6 percent within 2017’s end while the same may reach up to 2 percent in the subsequent year. However, in 2016 it was equivalent or lower than 2.1 percent. Low inflation rates in previous years were mainly because of dropping oil prices. Monetary policies are often formulated in consideration of inflation rate. Core inflation in 2017 (Q1 and Q2) was 1.7 percent as of now. The target, being 2 percent inflation rate, federal government has reached proximate to it by achieving 1.7 percent. Thus, elevating inflation rate to normal level will be easier for the federal in coming days.
Fund rate of federal government mainly controls the short term interest rates such as the LIBOR, banks’ prime rate, interest-only loans as well as credit card rates. Quantitative easing will be helpful if these funds are collected beforehand (Romei, 2017). As a result, soon after the normalisation of federal fund rates almost $4 trillion from the treasuries will be sold off. 10 year note of treasury yield will be raised highly when the federal will sell them and surge supply dynamics. Ultimately, it will lead to increase in interest rates that are of long-term nature, for example, corporate bonds and fixed-rate mortgages.
Question 2
One of the industries which are likely to pick-up in few years is e-commerce. It is primarily because smartphones are exploding largely in all emerging markets. For instance, it can be witnessed that Apple Inc. has already started its production in India. Thus, such initiation will help to spread internet connection and smartphones throughout the nation. In fact, Google also installed free wi-fi spots in various public places so that people can access internet connection. Therefore, every multinational organisation is trying their best to develop few industries sparingly and help emerging nations.
Furthermore, extractive industries will hardly have any role to play in the coming years. Construction industry is likely to surge due to development of varying emerging markets. Even new manufacturing zones and urban population increase will be catered by the construction industry growth (BMI Research, 2016). The service sector of emerging countries will remain as the key driver of economic development. The two main industries such as retail and financial services will continue to surge exponentially in coming years. For instance, it can be observed that luxury and street fashion clothing brands of U.S. and U.K. are actually entering these nations sparingly. Increasing purchasing power of the customers is helping those companies to earn heftily from the emerging markets. Furthermore, speciality chemical market is likely to experience high demand because of development in technological and industrial sectors.
Food consumption will definitely surge with increase in population. As a result, better quality food items will be highly in demand. Other than staples, demand for western foods, dairy products and organically grown grains and vegetables may increase.
As the population will age, people will want to insure themselves and invest in robust pension plans. Most importantly, untapped rural areas will be highly in target for the finance and insurance sector because simultaneously technological advancement can assist the same.
Conclusion
It can be inferred that both inflation and interest rates of U.S. will be increasing to optimum level due to implementation of robust monetary policies of Trump. However, structural unemployment is one of those side effects of various policies rolled out by the U.S. President. As a result, it is important to eliminate the unemployment rate from the core. On the contrary, industries such as infrastructure, financial services, retail, e-commerce and real estate will outperform in different emerging nations.
- BMI Research. 2016. Ten emerging markets of the future: highlighting key sectors.
- Romei, V., 2017. Economists revise up US growth forecast for this year.
- Swanson, A., 2017. The U.S. just had its worst year of economic growth since 2011.