Commentary
Abstract
4 NATIONAL INSTITUTE ECONOMIC REVIEW No. 175 JANUARY 2001 COMMENTARY Ray Barrell and Martin Weale Sentiment in the United States The final few weeks of last year saw a sharp worsening of economic sentiment in the United States of America and, given the importance of the American economy in the world, this worsening of sentiment spread rapidly. Our forecast indeed shows the US economy growing more slowly than last year, but there is no reason why this need cause a worsening of sentiment; the growth rate in 2000 was too high to be maintained for any length of time. Despite the rapid slowdown apparent in recent data, a smooth adjustment to a sustainable growth path is possible and forms the core of our fore- cast. However, there is the possibility that the imbal- ances which have built up are the consequence of expectations about future prospects which are now likely to be disappointed; this disappointment may be the factor behind the worsening sentiment and there is concern that it could lead to a growth rate much slower than we forecast or even a fall in output in 2001. The nature of the imbalances in the US economy can