## IMF Executive Board Concludes Article IV Consultation with United States _IMF News, July 12, 2016_ ## Source details **Canonical URL:** [IMF Executive Board Concludes Article IV Consultation with United States](https://www.imf.org/en/news/articles/2016/07/12/19/28/pr16332-imf-executive-board-concludes-article-iv-consultation-with-united-states) ## Other formats - [Markdown version](/en/news/articles/2016/07/12/19/28/pr16332-imf-executive-board-concludes-article-iv-consultation-with-united-states/index.md) - [Structured JSON version](/en/news/articles/2016/07/12/19/28/pr16332-imf-executive-board-concludes-article-iv-consultation-with-united-states/index.json) - [Bundle manifest](/en/news/articles/2016/07/12/19/28/pr16332-imf-executive-board-concludes-article-iv-consultation-with-united-states/bundle-manifest.json) ## Bibliographic details - Published: July 12, 2016 --- ### Economic outlook and near-term assessment - U.S. is in its seventh consecutive year of expansion. - Recent developments: - Unemployment rate has fallen to 4.9 percent. - Household net worth is close to pre-crisis peaks. - Temporary growth dip in the last two quarters due to lower oil prices (contraction in energy sector investment), strong dollar, and weak global demand weighing on net exports. - Real household disposable income is growing at 3 percent. - Housing market is growing at a healthy clip. - Current fiscal and monetary policy mix is supporting the economy. - Projections: - Economy expected to grow at 2.2 percent in 2016 and 2.5 percent in 2017. - Growth expected to decline steadily to 2 percent over the medium term. - PCE inflation expected to slowly and moderately rise above 2 percent in 2017–19, before returning to the Federal Reserve’s medium-term target of 2 percent. - Labor market: - Remaining labor market gap should close over the projection period. - Wage indicators have shown only modest acceleration. ### Risks to the outlook - Downside risks are tilted to the downside: - Uncertainty surrounding implications of the U.K. referendum could trigger continued financial market volatility or further appreciation of the U.S. dollar. - A more complex downside risk: potential growth rate may be lower than estimated and the output gap smaller than previously estimated — if true, the U.S. economy could soon hit capacity constraints, slow growth, and generate domestic inflationary pressures with negative global spillovers. - Upside risk: - Oil-related upside: delayed effect on consumption and a lessening drag from oil-related investment. - Financial sector vulnerabilities: - Pockets of vulnerabilities remain, particularly in the asset management and insurance industries, though risks are unlikely to be systemic at the current juncture. ### Longer-term challenges and distributional concerns - Structural headwinds that may weigh on prospective gains in economic well-being: - Rising share of the US labor force shifting into retirement. - Aging basic infrastructure. - Scanty productivity gains. - Labor markets and businesses less adept at reallocating human and physical capital. - Secular trends in income and living standards: - Labor’s share of income is around 5 percent lower today than it was 15 years ago. - The middle class has shrunk to its smallest size in the last 30 years. - Income and wealth distribution are increasingly polarized. - Poverty has risen. - If left unchecked, these forces will continue to drag down both potential and actual growth, diminish gains in living standards, and worsen poverty. ### Executive Board assessment and guidance on monetary and fiscal policy - Directors welcomed continued recovery, strong fundamentals, and supportive macroeconomic policies but noted important downside risks and uncertainties, including slower potential growth and a stronger dollar. - Monetary policy: - Pace of interest rate normalization should remain data-dependent, proceeding cautiously along a gradual upward path. - Some Directors saw merits in accepting a temporary overshooting of the medium-term inflation target until the expansion is solidly established; many Directors were concerned about risks of de-anchoring inflation expectations and eroding monetary policy credibility. - Directors welcomed authorities’ commitment to closely monitor economic and financial developments and to maintain clear, effective communication on interest rate adjustment. - Fiscal policy: - Near-term fiscal policy appropriately geared toward supporting growth and job creation. - Need for lasting institutional solutions to enhance the budget process and minimize fiscal uncertainties. - Urgency of addressing demographic trends, entitlement spending, and deteriorating infrastructure. - Value seen in calibrating a credible medium-term consolidation plan to guide fiscal policy toward debt sustainability. ### Structural and social policy recommendations - Short- and medium-term priorities urged by Directors: - Boost federal infrastructure spending. - Further reform health care and pension systems. - Reach agreement on skill-based immigration reform. - Advance pro-poor policies: - Expand tax credits to low-income households. - Raise the federal minimum wage. - Expand paid-family leave and childcare assistance. - Complementary measures to boost long-term growth: - Comprehensive reform of the U.S. corporate income taxation. - Further progress on trade integration. ### Financial sector recommendations - Continue implementation of recommendations from the 2015 Financial Sector Assessment Program. - Complete regulatory reforms under the Dodd-Frank Act. - Close monitoring and placing the insurance sector under consolidated national regulation and supervision. - Improve data collection and reporting in the nonbank sector. - Strengthen requirements on beneficial ownership. - Maintain dialogue and support capacity building in countries affected by the withdrawal of correspondent banking relationships. ### Selected economic indicators and key statistics (as presented) - Real GDP (percentage change): 2015 = 2.4; 2016 = 2.2; 2017 = 2.5; 2018 = 2.3; 2019 = 2.0; 2020 = 1.9; 2021 = (not listed). - Net exports (contribution to real GDP growth, percentage points): 2015 = -0.6; 2016 = -0.3; 2017 = -0.5; 2018 = -0.2; 2019 = -0.1. - Total domestic demand (percentage change): 2015 = 3.0; 2016 = 2.9. - Final domestic demand (percentage change): 2015 = 2.8. - Private final consumption (percentage change): 2015 = 3.1; 2016 = 2.7. - Public consumption expenditure (percentage change): 2015 = 0.4; 2016 = 1.2; 2017 = 1.4; 2018 = 1.5; 2019 = 1.0; 2020 = 1.3. - Gross fixed domestic investment (percentage change): 2015 = 3.7; 2016 = 4.3; 2017 = 3.8. - Private fixed investment (percentage change): 2015 = 4.0; 2016 = 5.0; 2017 = 4.2. - Equipment and software (percentage change): 2015 = 0.5; 2016 = 4.4. - Intellectual property products (percentage change): 2015 = 5.7; 2016 = 4.1. - Nonresidential structures (percentage change): 2015 = -1.5; 2016 = -1.9; 2017 = 3.4; 2018 = 1.8. - Residential structures (percentage change): 2015 = 8.9; 2016 = 10.0; 2017 = 7.3; 2018 = 5.9. - Public fixed investment (percentage change): 2015 = 1.7. - Change in private inventories (contribution to real GDP growth, percentage points): 2015 = 0.2; 2016 = 0.0; 2017 = 0.1. - Nominal GDP (percentage change): 2015 = 3.5; 2016 = 3.2; 2017 = 4.6. - Personal saving rate (% of disposable income): 2015 = 5.1; 2016 = 5.4; 2017 = 4.7; 2018 = 4.5. - Private investment rate (% of GDP): 2015 = 16.8; 2016 = 16.7; 2017 = 17.1; 2018 = 17.3; 2019 = 17.4. - Unemployment rate (percent): 2015 = 5.3; 2016 = 4.9; 2017 = 4.8. - Labor force participation rate (percent): 2015 = 62.6; 2016 = 62.8; 2017 = 62.9; 2018 = 62.7; 2019 = 62.5; 2020 = 62.3; 2021 = 62.1. - Output gap (% of potential GDP): 2015 = -1.1; 2016 = -0.8. - CPI inflation (q4/q4): 2015 = 1.1; 2016 = 2.6. - PCE Inflation (q4/q4): 2015 = 2.1. - Federal government balance (% of GDP, fiscal years): 2015 = -2.6; 2016 = -3.0; 2017 = -2.8; 2018 = -2.5; 2019 = -3.2; 2020 = -3.4. - Debt held by the public (% of GDP): 2015 = 73.6; 2016 = 76.0; 2017 = 75.6; 2018 = 75.9; 2019 = 76.4; 2020 = 77.0. - General government net lending (% of GDP, calendar years): 2015 = -3.8; 2016 = -3.6; 2017 = -3.7; 2018 = -3.9. - Primary structural balance (% of potential GDP): 2015 = -1.0; 2016 = -1.6; 2017 = -1.4. - Gross debt (% of GDP): 2015 = 105.7; 2016 = 107.9; 2017 = 107.8; 2018 = 107.4; 2019 = 107.5; 2020 = 107.7. - Interest rates (percent): - Three-month Treasury bill rate: 2015 = 0.3; 2016 = 0.8; 2017 = 1.6. - Ten-year government bond rate: 2015 = 3.3. - Current account balance (% of GDP): 2015 = -2.9; 2016 = -3.5; 2017 = -4.0; 2018 = -4.1. - Merchandise trade balance (% of GDP): 2015 = -4.2; 2016 = -4.3; 2017 = -4.6; 2018 = -4.7; 2019 = -4.8; 2020 = -5.0. - Export volume (NIPA basis, goods, percentage change): 2015 = 5.8; 2016 = 6.1; 2017 = 3.9. - Import volume (NIPA basis, goods, percentage change): 2015 = 8.2; 2016 = 6.4; 2017 = 5.6. - Net international investment position (% of GDP): 2015 = -41.0; 2016 = -44.2; 2017 = -47.9; 2018 = -51.7; 2019 = -55.8; 2020 = -59.4; 2021 = -63.0. - Gross national saving (% of GDP): 2015 = 18.8; 2016 = 17.6; 2017 = 16.9. - Gross domestic investment (% of GDP): 2015 = 20.2; 2016 = 20.1; 2017 = 20.4; 2018 = 20.6; 2019 = 20.7; 2020 = 20.8. - Private components (selected): Business saving/personal figures reported as Private = 19.9 (2015), 18.9 (2016), 18.0 (2017), 17.8 (2018), 17.9 (2019); Personal = 16.1 (2015), 14.8 (2016), 14.2 (2017), 14.5 (2018). *Source: IMF Executive Board press release, "IMF Executive Board Concludes Article IV Consultation with United States", July 12, 2016.* --- ## References - [United States and the IMF](http://www.imf.org/external/country/USA/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [1](http://www.imf.org/external/np/sec/pr/2016/pr16332.htm) - [http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2016/07/12/19/28/pr16332-imf-executive-board-concludes-article-iv-consultation-with-united-states_