Country Report United States December 2008

Outlook for 2009-10

• The incoming 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.
• An additional 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 cut its policy interest rate by another 50 basis points to 0.5% by end-2008, where it will stay until early in 2010.
• Real GDP is forecast to contract by 1% 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 decelerate sharply in 2009 and remain subdued in 2010. The severe weakness of domestic demand and easing commodity prices will exert strong downward pressure on US prices.

Monthly review

• The president-elect, Mr Obama, has indicated many of the candidates for the key appointments in his administration. The line-up suggests a focus on competence, pragmatism and orientation on the political centre.
• The initial focus will be on containing the financial and economic crisis, but Mr Obama has said that he intends to move quickly on implementing his agenda, including healthcare policy.
• The president-elect has made clear that he is preparing a massive new stimulus package that could amount to US$500bn-750bn. This and the weaker economy will drive the budget deficit to around US$1trn in fiscal year 2008/09 (October-September).
• The Treasury and the Fed have continued to expand measures to stabilise and improve financial sector conditions. While money markets have seen some improvement, risk spreads for corporate bonds have deteriorated further.
• GDP declined by 0.5% in annualised terms according to revised figures for the third quarter of this year. Forward-looking indicators, such as consumer confidence, have fallen to record low levels.

Source: Country Report

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