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IMF Slashes US Growth Forecast For 2014

By Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

The USA – well all of North America – suffered an exceptionally hard winter in 2013-14 with temperatures plunging to record lows as the continent was held in the grip of a polar vortex which produced record snowfall and snow much further south than normal. Given the harshness of the weather, it is understandable that any economic activity that involves being outside would be hard hit (construction, for instance), but sales receipts were also well down as consumers stayed at home.

The International Monetary Fund had been predicting that the US economy would grow by 2.8% in 2014, but largely as a result of the abnormal winter, they have slashed the forecast to 2% for full year growth. In an election year, the IMF has also weighed into the political debate over minimum wages, albeit unintentionally. The ruling Democratic Party wants to see a rise in the minimum wage whilst the opposition Republican Party argues that any hike could price workers out of jobs at a time when the economy is still not robust. The IMF is calling for authorities to keep interest rates down (they are widely predicted to rise next year) and to increase the minimum wage which, in their opinion, will strengthen the recovery by fuelling consumer demand (if the poorest have more income, they will be spending it).

With 15% of Americans living in poverty, an increase in the wages of the “working poor” could help to stimulate demand. Something like 70% of US goods and services are consumed by the domestic market. The IMF annual report on the USA notes: "Given its current low level (compared both to US history and international standards), the minimum wage should be increased". The IMF believes that an increase in the US minimum wage would have an impact on millions of households – the Republicans, of course, would question how this could be afforded.

Dr. Mike Campbell
About Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.
 

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