Washington, May 6 2014 - Economic activity in the United States is projected to pick up in steadily in 2014 as the effects of the severe winter weather dissipate and investment and consumption expand, according to the OECD’s latest Economic Outlook.
The recovery should gain pace steadily, with private demand benefiting from favorable financial conditions, strengthened household and corporate balance sheets, accommodative monetary policy and the easing drag from fiscal consolidation. Reduced uncertainty and normal cyclical forces should also boost business investment. Solid employment growth is projected to continue, with the unemployment rate declining to just below 6% by end-2015 and the negative output gap fading steadily.
The U.S. economy is projected to grow by 2.6% in 2014 and 3.5% in 2015 while the global economy will also strengthen over the coming two years. However, urgent action is still required to further reduce unemployment and address other legacies from the crisis across the OECD.
“Advanced economies are gaining momentum and driving the pick-up in global growth, while once-stalled cylinders of the economic engine, like investment and trade, are starting to fire again,” OECD Secretary-General Angel Gurría said while launching the Outlook during the Organization’s annual Ministerial Council Meeting and Forum in Paris. “But with the world still facing persistently high unemployment, countries must do more to enhance resilience, boost inclusiveness and strengthen job creation. The time for reforms is now: policies that spur growth but at the same time create opportunities for all, ensuring that the benefits of economic activity are broadly shared,” Mr Gurría said (read the full speech).
With the continuing strengthening of the economy in the U.S., monetary policy accommodation is expected to be removed gradually as the economic situation normalizes, and policy interest rates are expected to begin to rise by mid-2015.
The political agreement leading to the passage of the Bipartisan Budget Act and the subsequent lifting of the debt ceiling reduces uncertainty about fiscal policy for the projection period, however the OECD finds that the U.S. recovery remains subject to various risks.
On the negative side, business investment would rebound less vigorously than projected if firms’ growth expectations faltered. On the positive side, household’s stronger financial situation could reduce the savings rate, strengthening consumption more than projected. Economic growth could also be stimulated more robustly than expected by factors such as improved competitiveness and low energy prices.
For more information on the Economic Outlook, see: www.oecd.org/oecdeconomicoutlook.
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