The U.S. locomotive
| Author | Kornélia Krajnyák/Martin Mühleisen |
| Position | IMF Western Hemisphere Department |
| Pages | 233-239 |
Page 233
Energy costs have risen markedly, but the U.S. economy has proven resilient, remaining a force for growth in a period of global slack. Still, there is work to do.With strong short-term growth rates in prospect, the country is well positioned to begin to address some longer-term concerns. These include a historically low national saving rate and severe underfunding in key federal programs-Medicare and Social Security.
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The U.S. economy has proved resilient in the face of sharply higher energy costs, with its expansion and low interest rates providing a substantial boost to the world economy at a time of significant global slack. As the IMF's Executive Board recently noted, this strong short-term growth outlook leaves the United States well positioned to begin to address some longer-term concerns, including a historically low national saving rate and the severe underfunding of its Medicare and Social Security systems.
As recent indicators suggest, the U.S. economic expansion remains on track.While the economy slowed somewhat in recent quarters, growth continues to be above potential and seems set to speed up in the second half of the year. Household spending has been robust, fueled by rising asset prices, low interest rates, income growth, and steady improvements in employment. Growth remains broad-based, with a rebound in investment supported by low interest rates and strong corporate profits. There are also few signs of overheating in the labor market, despite an unemployment rate of only 5 percent.
Inflation, too, remains contained, although in recent months higher energy prices have pushed headline consumer price inflation to 2!/2 percent.
The global economy is likely to continue to benefit from the U.S. momentum. Net U.S. imports are estimated to have increased growth in the rest of the world by about !/4 percentage point a year since 2001. Favorable financial conditions in the United States have also helped to compress risk premiums on interest rates, lower interest rate spreads, and support activity across a wide range of emerging markets.
The expansion has, however, been marked by a relatively unusual-and likely unsustainable-set of domestic and external imbalances that is characterized by:
* An unprecedented external current account...
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