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US-economy-accelerating-but-not-yet-in-top-gear

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State of the US economy at the launch of the OECD Economic Outlook, November 2014

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US-economy-accelerating-but-not-yet-in-top-gear

  1. 1. US economy accelerating but not yet in top gear 25th November 2014 Catherine L. Mann OECD Chief Economist OECD Economic Outlook US and Global Briefing
  2. 2. GLOBAL OUTLOOK 2
  3. 3. The global economy is stuck in low gear 3 World GDP growth Per cent, seasonally adjusted annualised rate Source: November 2014 Economic Outlook database. -8 -6 -4 -2 0 2 4 6 8 -8 -6 -4 -2 0 2 4 6 8 Average (1995-2007)
  4. 4. Trade growth has been weak 4 Trade intensity1 Index, 1990=100 1. Index of sum of exports and imports as a ratio of GDP. Source: November 2014 Economic Outlook database. 50 100 150 200 250 300 350 United States Trend (1990-2007) 50 100 150 200 250 300 350 Japan 50 100 150 200 250 300 350 European Union 50 100 150 200 250 300 350 BRIICS
  5. 5. 5 Demand patterns are diverging . Non-residential investment per capita Index, 2005 = 100 Private consumption per capita Index, 2005 = 100 80 90 100 110 120 80 90 100 110 120 United States Euro area Japan 85 90 95 100 105 110 115 85 90 95 100 105 110 115 United States Euro area Japan Source: OECD National Accounts database; November 2014 Economic Outlook database; and OECD calculations.
  6. 6. 6 Trends are also diverging among emerging economies . GDP per capita Volume, 2005=100 Source: OECD National Accounts database; November 2014 Economic Outlook database; IMF WEO database; Central Statistical Organisation, India; and OECD calculations. 80 100 120 140 160 180 200 220 240 80 100 120 140 160 180 200 220 240 China India Brazil Russia
  7. 7. Growth projections for 2015-16 GDP Volume, percentage change 7 Source: November 2014 Economic Outlook database. Column12013201420152016World3.13.33.73.9United States2.22.23.13.0Euro area-0.40.81.11.7Japan1.50.40.81.0China7.77.37.16.9India4.75.46.46.6Brazil2.50.31.52.0Russia1.30.30.01.6
  8. 8. Global risks are on the downside There is a growing risk of euro area stagnation Diverging monetary policies could lead to more volatility for emerging economy Advanced economy debt levels are high and credit growth in some emerging economies has been rapid Potential growth rates could fall further 8
  9. 9. Monetary, fiscal and structural policies need to support growth Monetary, fiscal and structural policies are complementary tools Monetary policy needs to remain accommodative in most countries, and more aggressive QE is needed in the euro area Progress on fiscal consolidation has left room in many economies -- including in the euro area -- to ease the drag of fiscal policy on demand Ambitious structural reforms are needed to boost investment, trade and job creation 9
  10. 10. US OUTLOOK 10
  11. 11. 11 Output is expected to accelerate relative to its trend over the past few quarters GDP Volume, 2009=100 Real GDP growth Per cent, annual rate
  12. 12. 12 Consumption accelerates modestly but all pistons are not firing
  13. 13. 13 Household wealth has rebounded and deleveraging has largely run its course
  14. 14. 14 Business investment looks mediocre
  15. 15. 15 Residential investment accelerates but remains well below cruising speed
  16. 16. 16 Trade growth remains slow mirroring the global pattern
  17. 17. 17 The drag from fiscal consolidation is waning Government spending Contribution to GDP growth 4 quarter moving average Government fixed assets Annual growth rate real net fixed assets (excluding defense)
  18. 18. 18 The budget deficit has narrowed but debt remains high
  19. 19. 19 Declines in unemployment running ahead of the recovery
  20. 20. 20 Signs that labour market slack remains elevated
  21. 21. 21 Labour market tightening should put upward pressure on wages and demand
  22. 22. 22 Inflation rises but not achieve target
  23. 23. Risks Acceleration of aggregate demand may not materialise Normalisation of monetary policy could create financial market tensions Upside and downside risks from the process of monetary policy normalisation Household consumption and business investment may pick up more quickly than expected 23
  24. 24. Monetary and fiscal policy Fiscal policy should focus on addressing longer-term pressures associated with healthcare spending and old age pensions Assuming the recovery remains on track, policy rates should be gradually raised as labour-market slack is eliminated and wage growth becomes more apparent Monetary policy rates should remain at their current low level through mid-2015 The authorities should facilitate infrastructure spending 24
  25. 25. 25 More information… data visualization tool OECD Economic Outlook, November 2014 • Website with additional information • Read this publication online • Compare your country with OECD data www.oecd.org/eco/economicoutlook.htm OECD OECD Economics Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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