State of the US economy at the launch of the OECD Economic Outlook, November 2014

1. US economy accelerating
but not yet in top gear
25th November 2014 Catherine L. Mann
OECD Chief Economist
OECD Economic Outlook
US and Global Briefing

2. GLOBAL OUTLOOK
2

3. The global economy is stuck in low gear
3
World GDP growth
Per cent, seasonally adjusted annualised rate
Source: November 2014 Economic Outlook database.
-8
-6
-4
-2
0
2
4
6
8
-8
-6
-4
-2
0
2
4
6
8
Average (1995-2007)

4. Trade growth has been weak
4
Trade intensity1
Index, 1990=100
1.
Index of sum of exports and imports as a ratio of GDP. Source: November 2014 Economic Outlook database.
50
100
150
200
250
300
350
United States
Trend (1990-2007)
50
100
150
200
250
300
350
Japan
50
100
150
200
250
300
350
European Union
50
100
150
200
250
300
350
BRIICS

5. 5
Demand patterns are diverging
.
Non-residential investment per capita Index, 2005 = 100
Private consumption per capita
Index, 2005 = 100
80
90
100
110
120
80
90
100
110
120
United States
Euro area
Japan
85
90
95
100
105
110
115
85
90
95
100
105
110
115
United States
Euro area
Japan
Source: OECD National Accounts database; November 2014 Economic Outlook database; and OECD calculations.

6. 6
Trends are also diverging
among emerging economies
.
GDP per capita
Volume, 2005=100
Source: OECD National Accounts database; November 2014 Economic Outlook database; IMF WEO database; Central Statistical Organisation, India; and OECD calculations.
80
100
120
140
160
180
200
220
240
80
100
120
140
160
180
200
220
240
China
India
Brazil
Russia

7. Growth projections for 2015-16
GDP
Volume, percentage change 7
Source: November 2014 Economic Outlook database.
Column12013201420152016World3.13.33.73.9United States2.22.23.13.0Euro area-0.40.81.11.7Japan1.50.40.81.0China7.77.37.16.9India4.75.46.46.6Brazil2.50.31.52.0Russia1.30.30.01.6

8. Global risks are on the downside
There is a growing risk of euro area stagnation
Diverging monetary policies could lead to more volatility for emerging economy
Advanced economy debt levels are high and credit growth in some emerging economies has been rapid
Potential growth rates could fall further
8

9. Monetary, fiscal and structural policies need to support growth
Monetary, fiscal and structural policies are complementary tools
Monetary policy needs to remain accommodative in most countries, and more aggressive QE is needed in the euro area
Progress on fiscal consolidation has left room in many economies -- including in the euro area -- to ease the drag of fiscal policy on demand
Ambitious structural reforms are needed to boost investment, trade and job creation
9

10. US OUTLOOK
10

11. 11
Output is expected to accelerate relative to its trend over the past few quarters
GDP Volume, 2009=100
Real GDP growth
Per cent, annual rate

12. 12
Consumption accelerates modestly but all pistons are not firing

13. 13
Household wealth has rebounded and deleveraging has largely run its course

14. 14
Business investment looks mediocre

15. 15
Residential investment accelerates but remains well below cruising speed

16. 16
Trade growth remains slow mirroring the global pattern

17. 17
The drag from fiscal consolidation is waning
Government spending
Contribution to GDP growth
4 quarter moving average
Government fixed assets
Annual growth rate
real net fixed assets (excluding defense)

18. 18
The budget deficit has narrowed but debt remains high

19. 19
Declines in unemployment running ahead of the recovery

20. 20
Signs that labour market slack remains elevated

21. 21
Labour market tightening should put upward pressure on wages and demand

22. 22
Inflation rises but not achieve target

23. Risks
Acceleration of aggregate demand may not materialise
Normalisation of monetary policy could create financial market tensions
Upside and downside risks from the process of monetary policy normalisation
Household consumption and business investment may pick up more quickly than expected
23

24. Monetary and fiscal policy
Fiscal policy should focus on addressing longer-term pressures associated with healthcare spending and old age pensions
Assuming the recovery remains on track, policy rates should be gradually raised as labour-market slack is eliminated and wage growth becomes more apparent
Monetary policy rates should remain at their current low level through mid-2015
The authorities should facilitate infrastructure spending
24

25. 25
More information…
data visualization tool
OECD Economic Outlook, November 2014
•
Website with additional information
•
Read this publication online
•
Compare your country with OECD data
www.oecd.org/eco/economicoutlook.htm
OECD
OECD Economics
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.