The US economy shows strong signs of strengthening, despite threats stemming from Europe and excessively sharp short-term government spending cuts, the International Monetary Fund said Tuesday.
Despite being buffeted in 2012 by drought, disaster and
Washington's budget brinksmanship, the US recovery "is beginning to
show some bright spots," the IMF said in its World Economic Outlook,
the Washington-based crisis lender's twice-annual evaluation of
global conditions.
Credit from banks and other sources has become more readily
available to both consumers and businesses, spurring both consumption
and a recovery in long-stagnant construction activity. Hard-hit house
prices rose and unemployment dipped below 8 per cent for the first
time in four years.
Meanwhile, wages have been stable, keeping inflation under control
and allowing central bankers at the US Federal Reserve to keep
interest rates at unprecedented, near-zero levels likely for years to
come, providing a boost to the economy in return.
The IMF forecasts US growth to dip from 2.2 in 2012 to 1.9 per
cent this year, before jumping to 3 per cent in 2014.
The IMF found that the US economy's "balance of risks is still on
the downside," though it has eased. "The main risk" remains a
worsening of the fiscal crisis in the eurozone, which would hurt US
exports through both reduced demand" and a potential move by
investors into dollars, which could strengthen the currency and hurt
exports.
It also mentioned that the US banking system could be at risk of
contagion in such a situation.
Washington's "top policy priority" remains medium-term deficit
reduction through both social welfare entitlement reforms and
increased government revenue. US President Barack Obama made a
long-awaited proposal along those outlines last week, though its
future in Congress is cloudy.
