Real incomes were diminished by the unexpected rise in inflation in 2022 but have now risen above pre-pandemic levels . Job growth has been particularly fast with 16 million new jobs created since the end of 2020 . However , income and wealth gains have been uneven across the income distribution and poverty remains high , particularly following the expiration of pandemic-era support ,” commented the IMF on 17 July 2024 .
“ The ongoing disinflation has taken a relatively light toll on the economy . The Federal Reserve responded to record-high inflation by raising the policy rate by 525bps which bolstered policy credibility , provided an anchor for wages and prices , and helped guide inflation back toward the FOMC ’ s two per cent goal . Wealth gains and limited refinancing needs have bolstered household and corporate balance sheets against the contractionary impact of higher interest rates . Monetary policy tightening was also supported by important supply-side gains , including an expansion of labour supply from immigrant inflows . PCE inflation was 2.7 per cent in April ( down from a peak of 7.1 per cent in 2022 ) and is expected to return to two per cent by mid-2025 ,” it added .
The general government fiscal deficit and debt , as a share of GDP , are both projected to remain well above pre-pandemic forecasts over the medium-term . Specifically , under current policies , the general government debt is expected to rise steadily and exceed 140 per cent of GDP by 2032 . Similarly , the general government deficit is expected to remain around 2½ per cent of GDP above the levels
forecast at the time of the 2019 Article IV consultation .
“ Several steps have been taken to strengthen the functioning of the Treasury market and to better insulate money market funds from liquidity shortfalls . The pace of shrinking of the Federal Reserve ’ s balance sheet has begun to taper . However , concrete actions have been lacking in mitigating the banking system vulnerabilities that came to light in 2023 ,” continued the IMF .
IMF Executive Directors welcomed the remarkable performance of the U . S . economy over the past few years and noted that the ongoing disinflation process , aided by higher productivity growth and expanded labour supply ( including through immigration ), has taken a relatively light toll on economic activity . While the outlook remains positive , Directors emphasised that upside risks to inflation need to be monitored and determined actions will be necessary to address fiscal imbalances ,
Job growth has been particularly fast with 16 million new jobs created since the end of 2020
Image : Unsplash . com
Image : Shutterstock . com . financial vulnerabilities as well as increased inequality and poverty , which has risen back to pre‐pandemic levels .
“ Directors noted the ongoing intensification of trade restrictions as well as the domestic content provision in various fiscal programmes , which create a risk for both the U . S . and global economy . They urged the authorities to unwind obstacles to free trade and instead bolster competitiveness through investment in workers and infrastructure . Working with international partners to address the core issues that
risk undermining the global trade and investment system , including through concerted efforts to strengthen the WTO and ensure a robust and modern multilateral rules‐based system , will be critical ,” concluded the IMF .
Foreign Direct Investment ( FDI )
Expenditures by foreign direct investors to acquire , establish or expand U . S . businesses totalled US $ 148.8 billion in 2023 , according to preliminary statistics released on 12 July 2024 by the U . S . Bureau of Economic Analysis . Expenditures decreased US $ 57.4 billion , or 28 per cent , from US $ 206.2 billion ( revised ) in 2022 and were below the annual average of US $ 265.6 billion for 2014 – 2022 . As in previous years , acquisitions of existing U . S . businesses accounted for most of the expenditures .
“ In 2023 , expenditures for acquisitions were US $ 136.5 billion , expenditures to establish new U . S . businesses were US $ 7.4 billion and expenditures to expand existing foreign-owned businesses were US $ 5.0 billion . Planned total expenditures , which include both first-year and planned future expenditures , were US $ 175.9 billion ,” commented the U . S . Bureau of Economic Analysis .
In 2023 , employment at newly acquired , established or expanded foreign-owned businesses in the United States was 110,000 employees .
By industry , expenditures for new direct investment were the largest in transportation and warehousing . The manufacturing sector , at US $ 42.9 billion , accounted for 28.8 per cent of total expenditures . Within manufacturing , expenditures were largest in chemical manufacturing ( US $ 17.8 billion ) and electrical equipment , appliances and components ( US $ 6.6 billion ). There were also notable expenditures in professional , scientific and technical services ( US $ 6.0 billion ).
The country with the largest investment was Canada , with expenditures of US $ 53.4 billion . Japan ( US $ 14.6 billion ) was second , followed by Sweden ( US $ 8.4 billion ). By region , Europe contributed 33.8 per cent of new investment in 2023 . n
Image : Shutterstock . com .
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