1994 Economic Outlook: Hopes Become Beliefs

Economic forecasting is an uncertain task, but 1994 is certain to be a tough act to follow. Last year, the economy yielded one of its best performances in the past two decades, with perhaps the most favorable mix of real growth, low unemployment and low inflation for a single year since the early 1970s. Over this interval, in only one year (1978) did higher real growth of gross domestic product (GDP) combine with a lower unemployment rate. However, that combination helped set the stage for such high and accelerating inflation that real growth proved unsustainable in subsequent years. The final data for 1994 are yet to be compiled, but it appears that the nation has not had a combination of higher GDP growth and lower inflation than in 1994, nor a combination of lower unemployment and lower inflation, in any single year in the past two decades.