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IMF slightly lowers U.S. economy growth forecast in 2011

04-12-2011 09:37 BJT

WASHINGTON, April 11 (Xinhua) -- The International Monetary Fund (IMF) said on Monday the U.S. economy is expected to grow by 2.8 percent in 2011, a 0.2 percentage point lower than its previous forecast.

"The U.S. economy continues to recover, with easing financial conditions supporting private final demand in the face of higher commodity prices," said the IMF in its latest World Economic Outlook (WEO) report which kicked off the one-week-long programs of the IMF and World Bank Spring Meetings held here in Washington DC.

"Job creation has recently accelerated, but the pace of improvement in the labor market remains disappointing considering the size of the job losses during the decline," noted the IMF.

The report also projected the U.S. output will grow by 2.9 percent in 2012. The new figure is 0.2 percentage points higher than its forecast in January.

The Fund said that following a burst of strong growth driven by inventory restocking in late 2009 and early 2010, U.S. economic growth slowed but then strengthened again in the second half of 2010. This strengthening was supported by private final demand, and by the fourth quarter consumer spending which was rising at its fastest pace in five years.

The U.S. financial conditions have generally improved but corporate borrowing rates remain very low, and tight bank lending conditions are now starting to ease not just for large firms but for small- and medium-sized firms.

"This has helped rebuild consumer confidence, which is still being held down by labor and housing headwinds," said the report.

On the widely watched labor market, the IMF said that recovery "remains lackluster".

After shedding more than 8 million jobs in 2008 and 2009, the U. S. labor market has added just under 1 million jobs since the trough, barely sufficient to keep up with the growth of the working-age population. The employment-population ratio is thus largely unchanged since the start of the recovery. The risks to the outlook remain tilted to the downside.

The external environment continues to pose tail risks. Renewed financial turmoil in the euro area could substantially tighten financial conditions and weaken global demand. And a spike in oil and commodity prices, possibly due to continuing tensions in the Middle East and North Africa, could dampen confidence and weaken consumer spending.

On the domestic front, house prices could decline by more than expected, given the large shadow inventory of distressed properties, with adverse effects on household and financial balance sheets. There are, however, a number of upside risks to the outlook. Healthy corporate balance sheets could support stronger hiring and capital investment if business confidence improves. And private consumption, particularly of durables, may surprise on the upside given pent-up demand.

Editor:Du Xiaodan |Source: Xinhua

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