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US: Overview

Growth in the US has picked up more rapidly than expected, and we expect GDP growth of around 3% in 2010.  As stimulus packages are phased out and attention turns to fiscal consolidation, we expect growth in 2011 to moderate to around 2½%.

Growth prospects in the US have improved further over the past quarter.  Following a shallower recession than in Japan or the eurozone, the US saw a stronger recovery at the end of 2009. In the first quarter of 2010 GDP growth slowed a little, but household spending strengthened further, led by a substantial increase in spending on durables, continued improvement in investment and an increase in inventories.  Exports have picked up strongly but the contribution to growth has been outweighed by a stronger pick-up in imports.

Domestic demand has been driven by the effects of the economic stimulus programme and various other specific incentives, such as the car replacement (the so-called 'cash for clunkers') programme.  Consumer confidence, previously held back by the high rate of unemployment, seems now to be improving as the perception grows that employment prospects are improving.

We expect GDP growth of about 3% in 2010, slowing to 2½% in 2011 as the impact of the phasing out of the stimulus packages takes effect and attention turns to fiscal consolidation to reduce the budget deficit.