United States Business Forecast Report Q4 2009

Publication Date	July 2009
Publisher	Business Monitor
Product Type	Report
Pages	53
ISBN Number	not applicable
Product Code	BMI04102

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Summary

Over The Worst Of The Recession 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 3.0% 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
Over The Worst Of The Recession
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Greater Regulation Ahead.But To What Effect?
- The Obama administration has laid out its proposals for reforming the US's financial system
- Foreign Policy
- Obama's Limited Ability To Neutralise Strategic Challenges
- The Obama administration will find its ability to deal with major strategic challenges somewhat limited, given
- its ongoing commitments in Iraq and Afghanistan, and fiscal strains exacerbated by the recession
- Table: US Political Overview
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Recession May Be Ending. But Don't Get Excited
- For the first time this year, we have upgraded our forecast for US GDP growth in 2009, from -3.3% to -3.0%
- table : ECONOMIC ACTIVITY
- Balance Of Payments
- Current Account Deficit To Continue Contracting
- The majority of the adjustment in the US current account has already taken place, thanks to a rapid contraction
- of the trade deficit over the past year
- table : CURRENT ACCOUNT
- Fiscal Policy
- Expecting Little Long Term Fiscal Improvement
- The US Federal budget deficit has taken a structural turn for the worse. The deficit is currently languishing at its
- widest level in the post-war era, and is not going to re-enter surplus at any point during our 10 year forecast period
- table : FISCAL POLICY
- Monetary Policy
- Deflation Is Still A Greater Risk Than Inflation
- Despite renewed fears that the US economy is potentially headed for an inflationary period, our core scenario still
- envisages deflation as being by far the bigger danger over the next two years
- table : MONETARY POLICY
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 10 year forecast period to 2018
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Special Report
- The Fate Of ???Chindia'
- Overview
- Although China and India will continue to grow during the global recession of 2009-2010, they are not immune to
- the downturn, and face a number of risks in the near term
- China And India SWOT
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- TABLE: BMI BUSINESS & OPERATIONAL RISK RATINGS
- Institutions
- TABLE: BMI LEGAL FRAMEWORK RATINGS
- Infrastructure
- TABLE: FDI, DEVELOPED STATES
- TABLE: BMI TRADE RATINGS
- Market Orientation
- TABLE: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: BMI Global Assumptions
- Global Assumptions
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: GLOBAL & REGIONAL REAL GDP GROWTH
- TABLE: DEVELOPED MARKET EXCHANGE RATES
- TABLE: EMERGING MARKET EXCHANGE RATES