The economy of the United States continues to do well beyond expectations, despite the trade war. The International Monetary Fund (IMF) is therefore tightening its growth expectations this year. The long-awaited slowdown in growth on the other side of the Atlantic appears to be slower than previously assumed.
The world’s largest economy is likely to make 2.6 percent progress this year. That is significantly more than the plus of 2.3 percent that the fund predicted in April for 2019. The figure for next year is now 2 percent growth, which was initially expected to be 1.9 percent.
The IMF notes that the economy has been continuously on the rise since 2009. The US is approaching a record of the longest period of growth ever. That milestone is expected to be reached next month. Unemployment has now reached the lowest level in almost fifty years.
For the time being, however, there has been a slowdown in growth compared to last year. Then the US economy grew by 2.9 percent. The slowdown in growth has to a large extent to do with previous tax cuts and investments by President Donald Trump. As a result, the economy made extra strong progress last year.
Once the effect of the stimulus has been worked out, growth is likely to fall back to a growth rate that can be sustained for longer, or so-called potential growth. According to the IMF, that is about 1.8 percent per year for the US.
It’s not all cake and egg in the US, says the IMF. According to the fund, not all Americans reap the benefits of economic expansion. For example, many households receive hardly more money in the drawer than in the late 1990s. In addition, life expectancy in the US has been falling for some time and there would be more suicides.
The IMF is also concerned about the high government debt. The recent shutdown of the US government would show how unsustainable government finances are actually arranged. Furthermore, if the trade war continues for longer, it could cause serious economic damage. For the Federal Reserve, the advice is not to raise interest rates for a while until there are more signs of wage or price inflation than is currently the case.