Current outlook for the U.S. and trading partners

The International Monetary Fund (IMF) recently released an update of its World Economic Outlook. The current forecast by the IMF for the U.S. economy calls for real output (Gross Domestic Product or GDP) to increase by 3.0 percent in 2011 and then slip back to 2.7 percent growth in 2012. Both projections are well below the increases the IMF expects for global GDP — 4.4 percent for 2011 and 4.5 percent for 2012.

The International Monetary Fund (IMF) recently released an update of its World Economic Outlook (January 25, 2010). According to the report, the IMF projects world global output to grow by 4.4 percent for 2011 and 4.5 percent for 2012.

The IMF expects the main driver for the world economy to be emerging economies, while advanced economies struggle with high unemployment and the aftermath of the global credit crisis. Developing Asia and sub-Saharan Africa will especially benefit from stronger internal consumer demand in these countries as well as higher global demand for commodities.

Alternative views of U.S. outlook

The current forecast by the IMF for the U.S. economy calls for real output (Gross Domestic Product or GDP) to increase by 3.0 percent in 2011 and then slip back to 2.7 percent growth in 2012. Both projections are well below the increases the IMF expects for global GDP.

The IMF worries that expansion of the U.S. economy will be undermined by a number of continuing weaknesses including high unemployment, ongoing real estate problems, and mounting government debt. The IMF report estimates that U.S. gross government debt could exceed 110 percent of GDP by 2016, unless decisive policy actions are taken in the medium term.

The latest Blue Chip consensus forecasts by a panel of national economists are more optimistic. The Blue Chip pundits project U.S. real GDP will grow by 3.2 percent in 2011, followed by an upwardly revised 3.3 percent increase in 2012. Analysts seem to be putting considerable weight on the 4.4 percent increase in consumer spending recorded in Q4 2010, the best quarterly gain since the 5.2 percent growth recorded in Q1 of 2006.

The revised W. P. Carey macro forecast has also turned slightly more optimistic. Expected consumer and business spending have been revised upward in 2011.

Equipment and software outlays should show double-digit growth this year, but state and local cutbacks will be a drag on the recovery. By 2012, both residential and nonresidential construction should be providing a boost to the economy. Real GDP is projected to grow by 3.2 percent in 2011 and by 3.5 percent in 2012.

IMF forecasts for trading partners

The IMF's growth projections for the main trading partners of the U.S. can be seen in the table. Growth projections for the main trading partners are of interest because as the global demand expands, increased exports bring stronger gains for the U.S. economy.

The main goods trading partners of the U.S. are Canada, China, Mexico, Japan, Germany, and United Kingdom (UK) (ranked according to their share in U.S. trade). According to the IMF's forecasts, Canada, our largest trading partner, is expected to grow 2.3 percent and 2.7 percent in 2011 and 2012, respectively.

The second largest trading partner, China, is projected to grow 9.6 percent and 9.5 percent for 2011 and 2012. After recording a real output increase of 3.9 percent in 2010, the Japanese economy is estimated to slip to 1.6 percent and 1.8 percent growth in the next two years, the weakest expansion of any trading partner.

Economy@W. P. Carey, (Serpil Atalay is in the Communications Department of the Central Bank of Turkey. She is at Arizona State University this year as a Hubert Humphrey Fellow in the Cronkite School of Journalism and Mass Communication).