The U.S. economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year.
Total economic output in the third quarter was slightly above the maximum sustainable level of output as estimated by the nonpartisan Congressional Budget Office.
This is a measure of the economy’s potential to produce goods and services based on the supply of people working and how productive they are. In downturns actual output drops below potential and slows inflation. In advanced stages of expansions output can exceed potential and cause the economy to overheat.
It was the first time actual gross domestic product had exceeded potential GDP since the fourth quarter of 2007, suggesting the nation’s economic resources are being used efficiently. An acceleration in growth at this point could generate overheating that produces financial excess or long-elusive consumer price pressures.
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