Country Report United States November 2009

Outlook for 2010-11

• Despite some loss of support recently, the Democrats still look likely to retain their hold on both houses of Congress in the November 2010 mid-term election. The Republicans are currently too weak to present a serious challenge.
• Mr Obama is unlikely to back drastic trade protectionist measures, but a low-profile flow of "retaliatory" measures could still add up to a substantial increase in protectionism.
• The Fed will start to raise its policy rate from the third quarter of 2010, taking the rate to 1% by year-end. We expect the Fed to hold policy steady over much of 2011 to support activity against a background of waning fiscal stimulus.
• We have revised up our real GDP growth forecast for 2010 in the light of data that show a return to growth in the third quarter. But we maintain our forecast for growth to soften in 2011.
• The US dollar is likely to remain relatively weak against the euro into early part of 2010. We expect some pull-back for the greenback from the second half of 2010 as the Fed raises interest rates.

Monthly review

• On October 13th the Senate finance committee approved a bill that would require all Americans to buy healthcare insurance and would impose numerous restrictions on insurers.
• Congress is discussing a move to extend the US$8,000 tax credit for first-time homebuyers. On October 19th Mr Obama also unveiled a two-part programme to help home buyers and tenants.
• The federal budget deficit jumped to US$1.4trn in fiscal year 2008/09 (October-September), a record in nominal terms. As a proportion of GDP, the shortfall stood at 10%, the highest since the second world war.
• Overall retail sales fell by 1.5% month on month in September. Performance was, however, influenced by the ending of the "cash for clunkers" scheme, when the funds were exhausted in late August.
• The euro rose above US$1.50 on October 21st, pushing the US dollar to its lowest level since August 2008. The US currency has lost about one-fifth of its value against the euro since early March.
• Problems in the commercial real estate market are deepening, with vacancy rates in office buildings and shopping malls still rising. Commercial property makes up the second-biggest loan segment after home mortgages.

This report covers the following industry codes:
SIC Code: 37;1;60;70
NAICS Code: 336;11;52;72