United States Country Risk Report Q2 2016
The US economy is set to grow at a rate below its historical trend in2016, as a strengthening labour market, which will support privateconsumption, is offset by export and manufacturing headwinds. Weforecast real GDP growth of 2.2% in 2016, compared to an estimated2.5% in 2015.
The fiscal deficit will widen from 2016, as Congress relaxes spendingconstraints put in place since 2011, rising interest rates increase debtservicing costs, and mandatory spending obligations keep upwardpressure on expenditures.
The US current account deficit will deteriorate marginally as a percentageof GDP, as lower fuel costs cause the country’s import billto shrink but global headwinds and a strong dollar weigh on exports.
The US benchmark federal fund interest rate will rise only modestlyin the coming quarters, and will not reach its terminal leveluntil 2018. High-frequency economic data in the US have beenmixed over recent months, while downsides risks to global growthremain significant.
We have downgraded our forecast for economic growth, given themore persistent than expected struggles of the manufacturing sector.
Given global headwinds, these struggles are likely to stretch into2016, and we now forecast growth of 2.2% this year, versus ourprevious projection of 2.6%.
- Executive Summary
- Core Views
- Major Forecast
- Key Risks
- Chapter 1: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Growth Outlook
- Decelerating Investment Will Weigh On Growth
- Economic growth in the US will decelerate compared to 2015 as fixed investment continues to face headwinds from weakness in the oil
- and gas sector. Private consumption will continue to be the main driver of headline expansion as real wage growth begins to accelerate
- with labour market tightness.
- GDP By Expenditure Outlook
- TABLE: KEY ECONOMIC INDICATORS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- Fiscal Policy And Public Debt Outlook
- 2016 Spending Bill Points To Looser Spending Controls
- The budget bill passed at the end of December supports our view that spending will tick up in 2016, leading to a wider fiscal deficit.
- Meanwhile, the bipartisan support for the bill suggests that on budget issues, congressional gridlock is beginning to loosen.
- TABLE: GROSS FIXED CAPITAL FORMATION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: NET EXPORTS FORECASTS
- TABLE: FISCAL DATA
- TABLE: BUDGET MAKING PROCESS
- External Trade And Investment Outlook
- External Vulnerability Will Be Muted, Despite Headwinds
- The strength of the US dollar and weakness in the global economy will weigh on the US current account in the coming years, and the
- country's net international investment position will continue to deteriorate.
- Key Structural Characteristics
- TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
- TABLE: TOP GOODS IMPORTS IN 2014
- TABLE: TOP GOODS EXPORTS IN 2014
- Monetary Policy
- End Of An Era But Accommodative Rates To Remain
- The US Federal Reserve increased its target range for the benchmark federal funds rate to 0.25-0.50% from 0.0-0.25% and we
- expect further hikes in the quarters ahead. Domestic economic fundamentals will be strong enough to further raise rates but we stress
- that a weak external environment and low inflation will keep the trajectory of future rate hikes subdued compared to historic hiking
- Monetary Policy Framework
- Chapter 2: 10-Year Forecast
- The US Economy To 2025
- 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 takes their toll.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Chapter 3: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Three Scenarios For Trump's 2016 Election Campaign
- Donald Trump, the current frontrunner for the Republican party 2016 presidential nomination, will have a substantial impact on the
- general election in November. In this article, we outline three scenarios for his campaign, namely: 1) he fails to win the Republican
- nomination and bows out; 2) he wins the nomination; and 3) he runs as a third-party candidate.
- TABLE: POLITICAL OVERVIEW
- Structural Political Characteristics
- 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
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- TABLE: DEVELOPED STATES – LABOUR MARKET RISK
- TABLE: DEVELOPED STATES – LOGISTICS RISK
- TABLE: DEVELOPED STATES – CRIME AND SECURITY RISK
- TABLE: DEVELOPED STATES – TRADE AND INVESTMENT RISK
- Chapter 5: BMI Global Macro Outlook
- Global Macro Outlook
- Unfinished Business In 2016
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
- TABLE: UNITED STATES – MACROECONOMIC DATA & FORECASTS