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International Money and Finance (Final stage 3)
Finance & Accounting
Pages 10 (2510 words)
Country Risk >> United States Economic Analysis - Weak Recovery Story Continues United States - Economic Activity - 31 May 2011 BMI View: A poor real GDP reading for Q111 has forced a downward revision in our US real GDP growth forecast for 2011 to 2.6% from 2.9%.
This is the second consecutive downgrade in our US forecast, which came into the year at 3.1%. We are clearly less optimistic now than we were even a few months ago, but the overall view is the same as it has been for the past three years: the US recovery will be characterised by fairly weak and erratic growth and low inflation, but we do not expect a double-dip recession. We continue to expect growth between 2.5-3.5% over the coming couple of years, which is way below where it 'should' be coming out of such a bad recession. Occasionally, the US economy may post some great quarters, and may post some really poor ones. The Q111 real GDP growth estimate, of 1.8% q-o-q annualised (as per the second estimate released on May 26), could be lumped into the latter category. Deceleration Across The Board In Q1 US - Real GDP Growth By Expenditure Category (q-o-q SAAR) Source: BEA, BMI Below Trend, Par For The Deleveraging Course Growth really should be somewhere north of 4.0% just to get the overall level of output back to trend. Without faster growth, the unemployment picture will remain bleak. With such a disappointing pace of growth recovery, the US economy is roughly tracking the trajectory of other countries that experienced a major financial crisis and a prolonged period of deleveraging. We see some similarities in this respect to Japan, Sweden in the mid-90s, South Korea post-Asia crisis, etcetera. ...
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