WASHINGTON (Reuters) - U.S. economic
growth is set to rebound strongly in the second quarter as the scars of
a brutally cold winter fade, but inflation pressures will remain tame
through 2015, according to the Organization for Economic Cooperation and
Development.
In its latest economic outlook published on Tuesday, the OECD
forecast U.S. gross domestic product expanding at a 3.9 percent
annual pace this quarter, and it said it expects growth to maintain
a brisk pace for the remainder of the year as well.
An unusually cold and snowy winter held down GDP growth to a 0.1
percent rate in the January-March period, the government said in an
initial estimate last week, and that figure already looks
overstated.
Data on construction spending and factory inventories for March that
have come in since the GDP report was released have proven weaker
than the government had assumed, suggesting the economy likely
contracted.
"However, forward-looking indicators, such as investment intentions
and business expectations, and rises in measures of consumer and
business confidence suggest activity is bouncing back," the
Paris-based OECD said.
Growth is expected to average 2.6 percent this year and quicken to
3.5 percent in 2015, the OECD said, as gains in asset prices boost
household wealth and the drag from fiscal policy continues to
lighten. Growth averaged 1.9 percent last year.
"Household deleveraging and the rise in asset prices have caused
household net wealth to rise significantly, which will help sustain
consumption growth," the OECD said.
The OECD said the risk to its bullish growth forecasts was that
business investment would rebound less vigorously than projected if
firms' growth expectations faltered.
"On the positive side, households' stronger financial situation
could reduce the savings rate, strengthening consumption more than
projected," it said. "Economic growth could also be stimulated more
robustly than expected by factors such as improved competitiveness
and low energy prices."
INFLATION SEEN TAME
Despite the anticipated growth acceleration, inflation pressures are
likely to remain benign, given sluggish wage growth. The
unemployment rate is forecast averaging 6.5 percent this year, down
substantially from 7.4 percent in 2013.
Growth in unit labor costs, however, is seen averaging only 1.0
percent, unchanged from 2013, and the inflation indexes tracked most
closely by the Federal Reserve are seen trending below the U.S.
central bank's 2 percent target through 2015.
"Monetary policy remains very accommodative, as is appropriate given
slack in the labor market and weakness in price and wage
developments," the OECD said. "Inflation has fallen to low rates,
though some of the factors behind the fall are likely to be
transitory, and wage pressures remain muted."
The Fed has been reducing the amount of money it is injecting into
the economy through monthly bond purchases. It is expected to end
its bond-buying program later this year and gradually start to raise
interest rates around mid-2015.
In neighboring Canada, growth is expected to accelerate to 2.75
percent by the end of 2015, driven by exports. Consumption is
forecast strengthening and investment in housing slowing to a more
sustainable level.
The OECD forecast Canadian inflation rising to nearly 2.0 percent by
late 2015.
"As inflation approaches the 2 percent target, monetary
accommodation should be progressively withdrawn. Fiscal
consolidation should continue as planned," the OECD said.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
