OECD tips US growth slowdown in 2005
US economic growth will slow to 3.3 per cent in 2005, more than a full percentage point below this year due to high energy prices.
US economic growth will slow to 3.3 per cent in 2005, more than a full percentage point below this year, with the effect of high energy prices dragging on the economy for the next few quarters, the OECD said on Tuesday.
The Organisation for Economic Cooperation and Development said the US economy had already lost some momentum, but predicted that the US Federal Reserve would continue raising interest rates, perhaps at a more gradual pace than recently.
In its latest twice-yearly report, the Paris-based think tank said the world's biggest economy should continue to grow at faster than its "potential" rate -- essentially a long-run average of around 3.25 per cent -- but that there were substantial dangers.
"Further sustained increases in energy prices, weakness in the labour market, or a sharper-than-projected rise in long-term interest rates pose downside risks," it said.
The OECD forecast the US economy to have grown at an annual rate of 4.4 per cent this year, a tad higher than a 4.3 per cent projection made in September.
But it said gross domestic product (GDP) growth would come in at 3.3 per cent next year, rising slightly to 3.6 per cent in 2006. In its previous report in May, the OECD forecast 2005 US growth at 3.7 per cent.
"The expansion has lost some momentum, in part as a consequence of energy price increases," the new report said.
"These have already held back real disposable income gains and, with household savings near zero, are likely to weigh on consumption."
Despite this, corporate profits were remaining high, supporting future investment.
