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United States Country Risk Reports Q2 2015

United States Country Risk Reports Q2 2015

Core Views

The US economy is set to grow at a more rapid pace in 2015, supported by lower oil prices, a tightening labour market and improving sentiment. We forecast real GDP growth of 2.9% in 2015, up from an estimated 2.5% in 2014. Over the long term, global headwinds and a rebound in imports will cap real GDP growth below historical standards.

A stronger real GDP growth outlook and a congress committed to reining in spending will see the US budget deficit continue to narrow in fiscal year 2015, to 2.7% of GDP. Beginning in 2016, the deficit will widen as rising interest rates increase debt servicing costs and mandatory spending obligations keep upward pressure on expenditures.

The US current account deficit will continue to narrow marginally in 2015, as lower fuel costs cause the country's import bill to shrink. Export growth will pick up, but remain subdued by historical standards due to the sluggish global economy, particularly on the part of Europe.

The US benchmark federal fund interest rate will remain on hold throughout H115, and will rise only modestly in H215, to our endyear target of 0.50%. Although the domestic economy's rebound is gaining steam and risks to our forecasts are now to the upside, downsides risks to global growth have risen, particularly with regards to the eurozone.

Deep ideological divides between the White House and the two chambers of US Congress will limit the scope of policymaking over the final two years of Barack Obama's presidency. Nevertheless, as Obama seeks to establish his presidential legacy and Republicans seek to improve their own reputation, some areas of compromise, including on trade, modest tax reform and infrastructure spending, are within reach.

Major Forecast Changes

We have upgraded our 2015 GDP forecast to 2.9%, from 2.7% previously, due largely to the latest private consumption data which demonstrates continued gains, coupled with lower oil prices which will help further bolster the economy.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Despite Political Acrimony, Some Areas Of Common Ground Within Reach
Deep ideological divides between the White House and the two chambers of US Congress will limit the scope of policymaking over the
final two years of Barack Obama's presidency. Nevertheless, as Obama seeks to establish his presidential legacy and Republicans
seek to improve their own reputation, some areas of compromise, including on trade, modest tax reform and infrastructure spending, are
within reach.
TABLE: Political Over view
Long-Term Political Outlook
Fiscal And Inequality Concerns To Drive Political Debate
The long-term political outlook for the United States is improving, both at home and abroad. Nevertheless, there remain significant
obstacles to policymaking, including rising polarisation in Washington and a growing mistrust of elected officials among the electorate.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity
Growth Headlined By Stronger Consumption Outlook
The US economy is set to grow at a more rapid pace in 2015, supported by lower oil prices, a tightening labour market and improving
sentiment. We forecast real GDP growth of 2.9% in 2015, up from an estimated 2.5% in 2014. Over the long term, global headwinds and
a rebound in imports will cap real GDP growth below historical standards.
TABLE: Econo mic Acti vit y
Balance Of Payments
Lower Fuel Import Costs To Help Offset Flagging Export Demand
The US current account deficit will continue to narrow marginally in 2015, as lower fuel costs cause the country's import bill to shrink.
Export growth will pick up, but remain subdued by historical standards due to the sluggish global economy, particularly on the part of
Europe.
TABLE: Curent Account
Monetary Policy
External Dynamics Preclude Imminent Interest Rate Hike
The US benchmark federal fund interest rate will remain on hold throughout H115 and will rise only modestly in H215, to our end-year
target of 0.50%. Although the domestic economy's rebound is gaining steam and risks to our forecasts are now to the upside, downside
risks to global growth have risen, particularly with regards to the eurozone.
TABLE: Monetar y Polic y
Fiscal Policy
Stronger Economy Will Bolster Fiscal Account, But Only Temporarily
A stronger real GDP growth outlook and a congress committed to reining in spending will see the US budget deficit continue to narrow
in fiscal year 2015, to 2.7% of GDP. Beginning in 2016, the deficit will widen as rising interest rates increase debt servicing costs and
mandatory spending obligations keep upward pressure on expenditures.
TABLE: Fiscal Polic y
united states Q2 2015
Chapter 3: 10-Year Forecast
The US Economy To 2024
Down But Not Out
The US economy's pace of growth is set to slow over the next 10 years to a long-term rate of 2.5% as deleveraging from a massive
credit binge and demographic shifts take their toll. Nonetheless, BMI believes that the US is going to remain the world's greatest
economic power over our 10-year forecast period and beyond.
TABLE: Long -Ter m Macroecono mic Forecasts
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
tABLE: Developed States – Labour Mar ket Ris k
Table : Developed States – Logistics Ris k
Table : Developed States – Cri me And Security Ris k
table : Developed States – Trade And Invest ment Ris k
Chapter 5: Key Sectors
Autos
TABLE: Autos Total Mar ket – Historical Data And Forecasts
TABLE: North American Production Invest ments
TABLE: Commercial Vehicle Mar ket – Historical Data And Forecasts
Tourism
TABLE: Inbound Touris m
TABLE: Outbound Touris m
Other Key Sectors
TABLE: Oil and Gas Sector Key Indicators
TABLE: Food and Drin k Sector Key Indicators
TABLE: Infrastructure Sector Key Indicators
TABLE: Teleco ms Sector Key Indicators
TABLE: Defence and Security Sector Key Indicators
TABLE: Freight Key Indicators
Chapter 6: BMI Global Assumptions
Global Outlook
New Era For Oil
Table : Global Assu mptions
Table : Developed States , Real GDP Growt H, %
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table : Emerging Mar kets , Real GDP Growth , %

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