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United States Business Forecast Report Q1 2015

  • October 2014
  • -
  • Business Monitor International
  • -
  • 55 pages

Core Views
T he US economy will accelerate slightly this year, with real GDP growth increasing to 2.3% from 2.2% in 2013. Stronger contributions from personal consumption expenditure growth will be offset somewhat by slower fixed investment growth and a contraction in government spending, as well as a negative contribution from net exports. The federal government's fiscal accounts will show another year of substantial improvement, due to stronger revenue collection and continued fiscal restraint due to the budget sequester. We forecast the deficit will narrow to 3.0% of GDP from 4.0% of GDP in 2013. S tronger domestic oil and gas production will reduce the need for imported energy again in 2014, but this dynamic will be offset by accelerating domestic economic activity, which will boost imports. We forecast a 2.2% of GDP current account deficit this year, the narrowest since 1997.

We continue to believe that the US Federal Reserve will wind down its current quantitative easing programme by end-2014. Substantial slack remains in the labour market, and in light of a weak inflation outlook we do not anticipate the first hike to the Fed funds rate until H215. We believe that Republicans are heavily favoured to retain control
of the US House of Representatives and slightly favoured to take control of the Senate from Democrats in the November mid-term elections. This will not represent a significant change to the status quo regarding the difficulty of passing legislation, since any major bill passed by the Republican Congress can still be vetoed by
Democratic President Obama.

Major Forecast Changes
We have upgraded our 2014 GDP growth forecast to 2.3%, from 2.1% previously, due in large part to altered methodology and historical revisions by the Bureau of Economic Analysis. We are also now forecasting growth of 2.7% in 2015, up from 2.6%.

Table Of Contents

United States Business Forecast Report Q1 2015
Executive Summary 5
Core Views..5
Major Forecast Changes.5
Key Risks To Outlook..5
Chapter 1: Political Outlook 7
SWOT Analysis. 7
BMI Political Risk Index.. 7
Domestic Politics .. 8
Foreign Policy Missteps Add To Democratic Woes Ahead Of Election.8
Political dynamics slightly favour the Republican Party in the lead-up to the November 4 mid-term election. While fast-moving events,
particularly in the realm of foreign policy, have the potential to swing public opinion over the coming weeks, the intractable nature of the
challenges the administration faces abroad suggests that a Democratic surge during the final stretch is unlikely.
Table : Politic al Over view 8
Foreign Policy 10
Quadruple Foreign Policy Challenges Necessitate Russian Cooperation10
The US Obama administration faces four major foreign policy challenges - the Ukrainian conflict, the rise of the Islamic State, Iran's
nuclear programme, and a more assertive China.
Long-Term Political Outlook 12
Fiscal And Inequality Concerns To Drive Political Debate..12
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. 15
SWOT Analysis.. 15
BMI Economic Risk Index 15
Economic Activity .. 16
Growth To Accelerate, But Remain Below Historical Trend..16
The US economy will see slightly stronger growth in 2014 and will accelerate further in 2015, on the back of a rebound in private
spending on both consu mer goods and capital investment. Over the longer term, growth will remain below the historical average due to
constrained government spending and ongoing structural adjustments.
Table: Economic Activity16
Balance Of Payments 18
Rising Energy Production To Drive Current Account Improvement.18
The US current account deficit will gradually decline as a percentage of GDP in the coming years, as the trade account will be bolstered
by swelling domestic energy production which will spur export growth and reduce import demand. We forecast a current account
shortfall of 2.2% of GDP in 2014 and 2.1% in 2015.
Table: Current Account.19
Monetary Policy 20
Rate Hikes Unlikely Until H215.20
Monetary policy in the US will remain extremely loose by historical standards, as the Federal Reserve remains wary of jeopardising the
economic recovery, which has yet to gain significant momentum.
Table: Monetary Policy..21
Fiscal Policy 23
Budget Balance To Improve, But Long-Term Risks To The Downside23
The US budget deficit will continue to narrow in the coming quarters amid stronger revenue growth and still-constrained expenditures.
However, the deficit will level off above the country's historical average, due primarily to structural factors which will exert upward
pressure on spending.
Table: Fiscal Policy.23
Chapter 3: 10-Year Forecast. 27
The US Economy To 2023.. 27
Down But Not Out.27
The US economy's pace of growth is set to slow over the next 10 years to a long-term rate of 2.4% as deleveraging from a massive
credit binge and demographic shifts takes 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-Term Macroeconomic Forecasts27
Chapter 4: Operational Risk. 29
Operational Risk Index. 29
Low Risk For Businesses29
Operational Risk 30
Table: Developed States - Labour Market Risk.30
Table: Developed States - Logistics Risk33
Table: Developed States - Crime And Security Risks35
Table: Developed States - Trade And Investment Risk38
Chapter 5: Key Sectors.. 41
Oil and Gas 41
Table: US Proven Oil and Gas Reserves And Total Petroleum Data 42
Table: US Proven Oil and Gas Reserves And Total Petroleum Data 43
Infrastructure.. 45
Table: Construction and Infrastructure Industry Data..46
Table: Construction and Infrastructure Industry Data..47
Other Key Sectors 51
Table: Pharma Sector Key Indicators.51
Table: Telecoms Sector Key Indicators51
Table: Defence and Security Sector Key Indicators..51
Table: Food and Drink Sector Key Indicators.52
Table: Autos Sector Key Indicators.52
Table: Freight Key Indicators..52
Chapter 6: BMI Global Assumptions.. 53
Global Outlook 53
Big Emerging Market Revisions.53
Table: Global Assumptions.53
Table : Devel oped States , Real GDP Growt H, %..54
Table : Emerging Markets , Real GDP Growth , %.55

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