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2004 OECD Economic Outlook, Volume 2004 Issue 1

image of OECD Economic Outlook, Volume 2004 Issue 1

OECD's June 2004 assessment of economic developments and prospects.  In addition to the regular economic assessments and statistical information, this issue includes articles examining whether housing and mortgage market arrangements explain different degrees of economic resilience shown by OECD economies, through what mechanisms the US external deficit could adjust, to what extent stock market gyrations and one-off measures distort traditional measures of the fiscal stance, and how structural reform could enhance income convergence in Central European countries.

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United States

The expansion is now firmly established across most sectors of the economy, helped by continued stimulus from fiscal and monetary policies. Increases in disposable income induced by tax refunds and wealth gains are providing ongoing support for consumption. The strong growth of productivity and profits bodes well for future investment and output. Further sustained weakness in the labour market would, however, pose a downward risk to household income and consumption. With inflation at the lower end of desirable levels, monetary policy has remained supportive, but interest rates will need to be raised as the slack in product and labour markets dissipates. Government finances have deteriorated substantially as a result of cyclical developments, tax cuts and higher spending, especially on defence and homeland security. The large deficits projected over the coming years underline the need to adjust both tax and spending levels with a view to balancing the budget so as to raise national saving and prepare for impending demographic pressures. This would also help to lessen the external imbalance...

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