WASHINGTON – A Paris-based international group is forecasting that the U.S. economic expansion, celebrating its seventh birthday this month, should remain on track over the next two years with growth strengthening in 2017.
The 34-nation Organization for Economic Cooperation and Development said Thursday that U.S. growth, as measured by the gross domestic product, should slow this year to 1.8 per cent but accelerate slightly in 2017 to 2.2 per cent.
The OECD puts the risks of a U.S. recession as a “low-probability prospect” but did point to a number of long-term challenges facing the country. It recommended well-designed investments in innovation, infrastructure and improving job skills as a way to combat a prolonged period of weak growth in worker productivity.
The increased spending on investments would attack the slowdown in productivity and also help to alleviate other problems such as rising income inequality, the report said.
“Seven years after the financial crisis, the United States is making a comeback,” the OECD said. “The U.S. economic recovery, while modest by historical standards, has been one of the strongest in the OECD.”
The 2007-2009 Great Recession, which included the worst financial crisis since the 1930s, ended in June 2009. The economy has expanded since that time but at modest annual rates that have averaged around 2.1 per cent over the past seven years. That’s the weakest economic growth since the post-World War II period. But it’s still stronger than other major economies in Europe and Japan, which have lagged behind the United States in job creation and growth.
The OECD attributed the slow growth in the United States to a variety of factors including the severity of the recession. While growth has been slow, the recovery has now pushed output above pre-recession levels.
The OECD said the risks of a new recession over the next couple of years were minimal, but it did cite a number of low-probability risks that could, if they occurred, jeopardize the expansion.
Those threats ranged from a financial market meltdown to political gridlock that could raise the risks of a default on the government’s debt. Heightened geo-political tensions or terrorist threats could also undermine consumer confidence.