United States Business Forecast Report Q3 2009

Publication Date	May 2009
Publisher	Business Monitor
Product Type	Report
Pages	58
ISBN Number	2040-6363
Product Code	BMI03878

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Summary

A 'Great Recession', But Not A Depression

The US is in the midst of its worst recession since the Great Depression of the 1930s. However, the magnitude of the fiscal and monetary stimulus seen over the past year will help ensure that the most likely scenario for the US economy is a 'Great Recession', and not a full-blown depression.

That said, the economic recovery is going to be weak and prolonged, as US households deleverage their balance sheets and business investment retrenches in accordance with reduced aggregate demand. We are forecasting a 3.3% real GDP contraction in 2009, followed by growth of just 1.2% in 2010.

The parlous state of the economy means that President Barack Obama has his work cut out for him in the first year of his administration. While the Democratic Party's grip on both houses of Congress will give him leeway to enact new policies, there are already signs of dissent within the ranks, and it will be impossible for him to please both sides of the aisle. The Republican Party will face a steep uphill climb as the 2010 legislative midterm elections approach, but continued economic strife would put the party in better shape for a comeback in 2012.

The biggest risk to our core outlook is the potential for a 'double-dip' recession, in which a recovery in economic activity in H209 proves short-lived and the economy takes a second leg down in 2010-11. The risks of this scenario unfolding have risen over the past few months, in our view.

For now, we are content with our 2010 real GDP growth forecast of 1.2%, which reflects our core view of an 'L-shaped' recession - one in which the contraction in output is sharp, but the recovery is tepid. It will take until at least H211 before real GDP growth returns to trend.

The biggest threat to the country's business environment standing in the short-term is the potential raft of new regulations and quasi-nationalisations arising from the financial sector meltdown.

Government involvement in key sectors, such as autos, is also a concern. Looking beyond the current downturn, however, the US business environment continues to possess a myriad of basic strengths, including a competitive labour force and a legal system that protects investor rights and is conducive to conducting business. The Obama administration's ambition to rebuild the US's creaky physical infrastructure is also welcome, but it could be many years before the impact of any plans will be felt.

Content

Executive Summary
- A 'Great Recession', But Not A Depression
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- A Republican Comeback In 2010?
- President Barack Obama's honeymoon period is coming to an end, and the challenges he faces are formidable.
- Foreign Policy
- Obama's Challenges And Opportunities In Asia
- The Asia-Pacific region offers President Barack Obama considerable challenges, but also major opportunities.
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Is The Worst Over?
- Our core view that H109 would see the end of the worst of the ongoing recession appears to be playing out.
- Balance Of Payments
- Swinging Closer To Balance
- The US current account deficit is set to come down rapidly over the coming years, as consumers tighten their belts.
- Fiscal Policy
- Stimulus Comes At A Big Price
- According to BMI's projections, the US federal budget deficit could exceed 14% of GDP in 2009-10, and come in
- double-digits in 2010-11, as Washington scrambles to use fiscal ammunition to cushion the economic downturn
- and tax revenues dry up.
- Monetary Policy
- Uncharted Territory For Fed Policy
- We expect the Federal Reserve to keep nominal interest rates near zero through the first half of 2010 at least, as
- it attempts to reinflate the economy.
Chapter 3: 10-Year Forecast
- The US Economy To 2018
- Despite Challenges, Still The World Leader
- Despite concerns over the sustainability of its economic superpower status, BMI believes that the US's
- importance in the global economy is unlikely to wane much over the ten year forecast period to 2018.
Chapter 4: Special Report
- The Outlook For Global Banking
- Business Environment Rating Outlook
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: Key Sectors
- Automotives
Chapter 7: BMI Global Assumptions
- Global Outlook
List of Tables
- Table: US Political Overview
- Table: ECONOMIC ACTIVITY
- Table: Long -Term Macroeconomic Forecasts
- Table: LOAN-TO-DEPOSIT RATIOS, Selected States
- Table: LOAN GROWTH (% CHG Y-O-Y), Selected States
- Table: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATINGS, SELECTED STATES
- Table: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Table: BMI LEGAL FRAMEWORK RATINGS
- Table: FDI, DEVELOPED STATES
- Table: BMI TRADE RATINGS
- Table: TOP EXPORT DESTINATIONS
- Table: US Autos Sector - Historical Data & Forecasts
- Table: GLOBAL ASSUMPTIONS
- Table: GLOBAL ASSUMPTIONS - LONG-TERM FORECASTS
- Table: Developed States, Real GDP Growth Forecast
- Table: EMERGING MARKETS, REAL GDP GROWTH FORECAST
- Table: Commodities
- Table: GLOBAL & REGIONAL REAL GDP GROWTH