U.S. Economic Outlook: Quarterly developments

• The incoming U.S. administration will be inheriting a healthy economy. The job market is posting solid gains, home sales and house prices have largely recovered from the bust, and the stock market continues to hit new highs. The current expansion has passed seven years, making it the third longest ever. • The U.S. economy has added private sector jobs for 80 months and in November added another 178,000 jobs, with the unemployment rate falling to 4.6%, its lowest level since 2007. Since its post-crisis nadir in early 2010 the economy has created 15.6 million jobs. • Wage growth is running ahead of inflation and consumer confidence is at its highest levels in nearly a decade. In October, U.S. personal income climbed at the fastest rate since April, highlighting the growing upward pressure on wages form a tighter job market. • The economy expanded in the third quarter at the fastest pace in two years (3.2%). Consumption growth, a key element of U.S. economic output, was revised higher to a 2.8% pace, from the previous reading of 2.1%. • U.S. home prices have climbed back above the record reached more than a decade ago, bringing to a close the worst period for the housing market since the Great Depression. The average home price for September was 0.1% above the July 2006 peak, according to S&P Case-Schiller U.S. National Home Price Index. • The Federal Reserve was confident enough about the underlying strength of the U.S. economy to raise the benchmark interest rate by 25 basis points at its December 13-14 meeting, only the second increase in a tightening cycle that started a year ago. The decision to lift rates was unanimous and policymakers anticipate three rate rises in 2017. However, the outlook for next year could shift significantly based on policy changes – such as tax cuts and higher trade tariffs – that the president-elect has promised.