Section II. Prospects for North America and Japan

Extract

Economic growth remains robust in the United States. Output growth is projected to be around 4 per cent this year, for the third year in succession. IMF estimates suggest that the present expansion will become the longest on record if maintained until February of next year. Private sector demand is continuing to expand rapidly, underpinned by the sizable gains in equity markets over the past few years. Underlying price inflation has remained quiescent, helped by continued above-trend growth in productivity at a time when the unemployment rate has fallen to levels last seen in the 1960s. Even so, there are some emerging signs of overheating in the economy, with the current account deficit projected to rise to 4 per cent of GDP in the latter half of this year. Some favourable transitory factors which have helped contain inflationary pressures, such as the appreciation of the dollar and weak commodity prices, also now appear to have come to an end.