Country Report United States July 2009

Outlook for 2009-10

• The Democrats are likely to retain their hold on both houses of Congress in the mid-term election in November 2010, although they may lose some support. The Republicans are too weak to be a serious challenge.
• Apart from the focus on stabilising the financial sector, the president, Barack Obama, will concentrate on implementing a healthcare reform. Major progress in extending coverage to those currently uninsured seems likely.
• A new fiscal stimulus package, approved in February this year, will drastically increase the federal deficit. Concerns about the fiscal position will increasingly dominate the policy discussion.
• The Economist Intelligence Unit expects the Federal Reserve (Fed, the central bank) to keep its policy rate target at just above 0% for 2009 and 2010. Unorthodox monetary policy measures will start to be phased out next year.
• Real GDP is forecast to contract by 2.6% in 2009 as the financial crisis and the housing downturn take their toll on domestic demand. Massive fiscal and monetary stimulus will lead to a recovery of growth to 1.4% in 2010.
• 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 massive slack in the economy.
• The current-account position will improve sharply. We expect the current-account deficit to fall to less than 3% of GDP in 2009 and 2010, partly owing to lower commodity prices.

Monthly review

• The focus has increasingly moved to the battle over healthcare reform. The emphasis has shifted towards savings measures, although increased coverage remains a primary objective.
• Mr Obama is making efforts to improve the country's standing among Muslims, and is pushing Israel to make concessions in the conflict with Palestinians. He has also treaded carefully following the disputed Iranian vote.
• Government interference has become a rising concern, given the massive surge in federal spending, and a drastic increase in government control over the financial and automotive industries.
• The government is preparing legislation to improve financial regulation. However, the number of agencies involved will remain high.
• Indications of recovery have continued to strengthen, although a surge in bond yields has emerged as a new threat to the recovery.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;60;49;39;53;70;48;2834;80;20;10
NAICS Code: 336;52;22;31;44;72;517;3254;62;311;212