United States: Long-term challenges

Output growth has slowed from the rapid rates of recent years. House-building has declined especially sharply. But with this and other adjustments being localised and temporary, healthy growth in GDP should soon resume. Core inflation has risen, partly reflecting the flow-on of higher energy prices to other goods and services. But assuming energy prices level out, this effect will fade and inflationary pressures should subside.
With core inflation uncomfortably high, monetary policy is now mildly restrictive. There may be scope for reductions in interest rates once core inflation is on a clear downward trajectory. The federal government budget deficit has fallen but it may stay around 2% of GDP over the forecast horizon. In addition, long-term challenges of funding entitlements are becoming steadily more pressing and remain to be addressed.
Population (000s), 2005296 410
Area (000 sq km)9 376
CurrencyDollar
GDP (Billion USD), 200512 428.5
Life expectancy at birth (Women, Men), 2003 80.1, 74.8
Total labour force (000s), 2005150 564
Government typeFederal Republic
Indicators% change unless otherwise indicated
200620072008
GDP growth3.32.42.7
Household savings ratio-0.20.91.7
Consumer price index3.32.32.3
Short-term interest rate (%)5.25.35.0
Unemployment rate (%)4.64.85.1
General government financial balance
(% GDP)
-2.3-2.8-3.0
Current account balance (% GDP)-6.6-6.5-6.6
Source: OECD©OECD Observer No. 258/259, December 2006


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