Economics Hights

摘要

Overall growth in the US slowed in Q4 2005 from Q3, primarily due to a decline in automotive sales and a large drop in defence spending. Weakness in consumer confidence following hurricanes and rising energy prices has also impacted on the economy. However, entering Q1 2006, the US economy has picked up again, and business and manufacturing confidence remains high, but we believe that industrial output may be vulnerable to a modest correction. We are forecasting that IP growth will ease from the 3.1 percent rate seen in 2005 - down to 2.6 percent both this year and 2007.Nevertheless, manufacturing capacity utilisation has now moved above 80 percent , which is often perceived as a trigger for further capital investment. However, this will also boost the risk of stronger price pressures for the remainder of this year. US interest rates continue to be tightened, with the Fed funds rate increased by another 25 basis points to 4.75 percent end of March - the 15th consecutive rise. However, the FOMC has maintained its stance that "some further policy firming may be needed" and we envisage a move into the 5.0-5.5 percent region this year. Rising interest rates have maintained the strength of the dollar, thus limiting the potential for a devaluation of the currency to reduce the trade deficit. Moreover, there are increasing political incentives to cut the current fiscal deficit, which will have the medium-term impact of constraining demand, either via tax increases or spending cuts. US GDP growth is therefore forecast to ease this year and the next, our current forecasts envisage growth of 2.8 percent in 2006 and 2.6 percent in 2007.