News Column

US Economy Showing Strength

April 16, 2013
US Economy

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.

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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

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