Country Report United States February 2009

Outlook for 2009-10

• The new Democratic president, Barack Obama, has a clear popular mandate and a substantial majority in both houses of Congress. However, Mr Obama will have to focus on controlling the financial crisis, at least initially.
• A new fiscal stimulus package is set to be approved, and further measures to boost financial markets are also likely. The fiscal stimulus and weaker economic situation will drastically increase the federal deficit.
• Mr Obama will focus on implementing his campaign promises on healthcare reform. Some important progress in extending coverage to those currently uninsured seems likely, despite substantial obstacles.
• The Economist Intelligence Unit expects the Federal Reserve (Fed, the central bank) to keep its policy rate target at just above 0% for 2009, before tightening very slowly from the second half of 2010.
• Real GDP is forecast to contract by 2% in 2009 as the financial crisis and the housing downturn take their toll on domestic demand. Slowing growth in the developed world will also curb US export growth in 2009.
• Average consumer price inflation is set to turn negative in 2009 as a result of declining commodity prices. Inflation should turn positive again in 2010 but will remain low owing to the severe weakness of domestic demand.
• The outlook for the US current-account position is for an improvement over the forecast period. We expect the current-account deficit to narrow to 3.2% of GDP in 2010 on the back of lower commodity prices and weak imports.

Monthly review

• Mr Obama's inaugural address on January 2oth highlighted the severity of the economic and foreign policy challenges he faces.
• A day after taking office, Mr Obama announced measures to encourage greater government transparency and accountability.
• The new president has signalled that he intends to overhaul the US$700bn TARP programme. He will also be under pressure to improve the accountability of the disbursements.
• The CB's consumer confidence index fell to its lowest level in December 2008 since its inception in 1967. Unemployment rose sharply in the last quarter of 2008, and workers are increasingly being forced to accept pay cuts.
• Low commodity prices and weak demand are leading to a persistent fall in the US trade deficit, despite the fact that export demand is also weak.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;60
NAICS Code: 22;52