Country Report United States January 2009

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 keep its interest rates at just above 0% for 2009 before tightening very slowly in 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 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.
• 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 2.6% of GDP in 2009, with a further slight improvement in 2010.

Monthly review

• Mr Obama is preparing to make swift progress on policy once in office, and has made progress in presenting his team. The main concern is that the heavy-hitters nominated will be difficult to control.
• The present-elect is preparing a stimulus package. The focus will be on a massive infrastructure programme to combine fiscal stimulus with measures to enhance potential growth.
• Stabilisation of the financial system and the macroeconomy has also dominated monetary and financial policy. The Fed cut its interest rates to 0-0.25% in December and has announced additional unconventional measures.
• The economy was officially in recession in December 2008, and recent indicators, including massive drop in employment, suggest a further sharp deterioration.
• Inflation has also fallen sharply. Although this was largely the result of a slump in commodity prices, it has pointed to a growing risk of deflation.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;49;82;47;1;10;59;39
NAICS Code: 52;22;61;48;11;212;44;31