The U.S. economy may be fired up by a rush of household formation, unleashing pent-up demand for everything from homes to weddings.
So say economists at UBS AG, who have designed a model to gauge the potential for a revival in the creation of new households that could power the economy beyond the 2 percent growth pace recorded since the end of the 2009 recession.
The gap between actual and potential household formation appears large enough to support spurts of growth and underpin a durable expansion of around 3 percent in some years, the economists led by New York-based Maury N. Harris said in an April 11 report.
That outlook is based on the estimate that reducing the 2.3 million gap between the number of actual and potential U.S. households could boost annual consumer spending growth by almost one percentage point.
Housing starts, for example, could improve to 1.10 million units next year and 1.35 million in 2014, said the UBS economists. Such developments are leading them to forecast the world’s largest economy will grow 3 percent in 2014, compared with the 2.7 percent median of economists surveyed by Bloomberg News.
Key to releasing this postponed demand will be how the labor market performs and the spending choices of those already employed, the economists said.
Housing and automobiles are the likely targets for increased spending, they said. Younger adults have the most room to spend after a period in which they often delayed normal living arrangements by living with their parents or friends.
Spending on weddings and children may also witness a surge in strength as couples find themselves financially secure enough to marry and have babies, they said.