2005 OECD Economic Outlook, Volume 2005 Issue 1

image of OECD Economic Outlook, Volume 2005 Issue 1

Presents OECD's assessment of the economic outlook to the end of 2006 for the OECD area and China, Brazil, and the Russian Federation.  It finds that Japan and the US have rebounded but that Europe is lacking in sustained momentum, and it carefully examines why. This issue of the OECD Economic Outlook also includes several medium-term scenarios projecting to 2010. The special chapter covers measuring and assessing underlying inflation.

English Also available in: German, French

United States

The expansion has continued at a solid pace, driven by private domestic demand that has been little restrained thus far by energy price or interest rate increases. Household and business spending has been supported by ongoing wealth gains and favourable financial conditions. By contrast, net exports have subtracted considerably from growth, and the external account has again deteriorated. With resource slack diminishing and unit labour cost growth picking up, core inflation has moved higher. Growth is expected to slow towards potential during the next few quarters, and inflation to edge up.

Although some of the monetary stimulus has been removed, further tightening is needed to contain emerging inflationary pressures, not least because long-term interest rates have remained surprisingly low. Government finances have improved little, as faster revenue growth has been partly offset by higher spending. Projected deficits thus remain large, underlining the need to adjust tax and spending levels to rein in the debt accumulation and prepare for impending demographic pressures. This might also lessen the record external imbalance.

English Also available in: French

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