United States Economy

The outlook for developed countries for the year 2013 seems to be very challenging and full of risks and uncertainties. The United States economy has not been able to completely overcome the problems that resulted due to the sub-prime crisis that had hit the US economy six years ago. Per capita income and employment levels are still lower than those reached before the crisis. The first half of 2012 witnessed some signs of recovery.

Investment and exports demand were rising and an improvement in the number of job opportunities was observed. But these signs of growth were short lived because of weakened worldwide economic situation and sovereign debt crisis in Europe. In addition to this, there were home-grown problems like failure in aversion of fiscal cliff.

 United States Economic Performance from 1990-2013

 United States Economic Performance from 1990-2013

Government expenditure in the U.S. is likely to fall by about $98 billion and taxes are expected to increase up to $450 billion in 2013 due to a fiscal cliff. This scenario will perhaps send the US economy back into official recession. As a result, the world economic growth is likely to be impacted and is expected to be halved to 1.2% in 2013. The loss of output to developing countries would be about 1%. Its supporters however raise an argument that the cliff itself would be a long-term positive. They say that the U.S. has to manage its deficits, if not now, then at some point of time in the future. Though this sort of action would be a harsh one because its short term effects would be bitter, it would be a definitive action for achieving long term benefits.

American Economic Growth Indicators 2013

GDP is expected to reach to 1.7%, lower than 2% which was estimated at the end of 2012. As a result of implementation of fiscal cliff a poorer short-term scenario is predicted.
• Though business investment was considered to be a robust driver of growth in the past two years but now firms have become more risk averse in the light of both homegrown and outside uncertainties and risks.
• The housing sector is expected to recover slowly and investment in residential sector will rise steadily.
• The unemployment rate stayed well above 8% for most part of the year-2012 but lowered down in the last few months. The unemployment rate is likely to be moderate in 2013, above 7%.
Inflation is expected to retreat down further to 1.3%.
Exports and imports slowed down significantly at the end of 2012. In the outlook for 2013 imports and exports are likely to grow above 3.5%.
Monetary policy will continue supporting growth in the upcoming years.
Fiscal policy is expected to become stricter in the outlook. Government expenditure is expected to drop down by about 3% in 2013-2014.

In 2011, S&P, a rating agency, downgraded the US to ‘negative’ because of its political and economic mess. However, it has upgraded its outlook for the US economy to stable from negative for the year 2013. S&P said that the dollar’s reputation as the global “key reserve currency” called for this decision. The rating agency assigned AA+ to long-term and A-1+ to short-term ratings.They believe that the monetary policies of the US are supportive of growth and have the ability to tackle major economic and financial shocks. S&P believes that the fiscal cliff arrangement can result in positive long term output for the the US economy.

On the other hand, the International Monetary Fund (IMF) finds that the deficit reduction plan of the US economy is poorly designed and excessively rapid. IMF intimated that the cuts in the education, science and infrastructure expenditures will not only result in recession in the short term but would also hinder medium term potential growth of the US. Instead, it should slow down with its fiscal adjustment this year, which would boast of creation of jobs and contribute to sustainable development. It should also hurry up in putting into place a blueprint defining its structure for the medium term so as to sustain long-term fiscal sustainability.

United States Economic Performance 1980-2015
Year GDP % Change Inflation % Change Year GDP % Change Inflation % Change
1980 -0.24 9.02 1998 4.45 1.09
1981 2.59 9.34 1999 4.69 1.53
1982 -1.91 6.2 2000 4.09 2.28
1983 4.63 3.95 2001 0.98 2.28
1984 7.26 3.55 2002 1.79 1.54
1985 4.24 3.2 2003 2.81 1.99
1986 3.51 2.02 2004 3.79 2.75
1987 3.46 2.55 2005 3.35 3.22
1988 4.2 3.5 2006 2.67 3.07
1989 3.68 3.89 2007 1.78 2.66
1990 1.92 3.7 2008 -0.29 1.96
1991 -0.07 3.33 2009 -2.78 0.76
1992 3.56 2.28 2010 2.53 1.22
1993 2.75 2.38 2011 1.6 2.06
1994 4.04 2.13 2012 2.22 1.84
1995 2.72 2.09 2013 1.49 1.63
1996 3.8 1.83 2014 2.43 1.64
1997 4.49 1.71 2015 2.43 1

Source: World Bank

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Last Updated on : 20th February 2015 Next Update : February 2016