Prospects for 1998 Economic growth is likely to slow over 1998 and inflation may rise somewhat, but remain modest. However, a slowing in growth appears to be a higher probability than an increase in inflation. The economy ended 1997 with still very positive fundamentals, notwithstanding some apparent weakness in demand in the fourth quarter.
Momentum in income growth, a high level of wealth, a record level of consumer confidence, lower mortgage rates, and ready availability of jobs support the household sector. Firms are highly profitable and can finance investment on attractive terms. Inflation is low. There are few imbalances in the U.S. economy that would appear to be threats to the expansion.