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January 2006
Economic Profile - United States of America
Capital: Washington D.C.
Currency: United States dollar (USD)
Language: English |
 |
| Key Data |
2003 |
2004 |
2005* |
Key Economic Trends
Real US GDP growth is expected to slow from 3.5 percent in 2005 to 2.9% in both 2006 and 2007. The impact of monetary tightening on the financial health of the personal and corporate sectors is a major concern.
High levels of personal debt have made consumers vulnerable to rising interest rates. Rising interest rates will squeeze consumer spending and likely slow housing price growth. The desire to save more will likely soften consumer demand towards the end of 2005 and throughout most of 2006.
Business investment is expected to continue to rise at a healthy pace. Corporate profitability improved in 2004-05 allowing firms to fund investment from current profits. Profitability is likely to deteriorate in 2006-07 as productivity growth slows and employment continues to rise. Corporate debt remains high and interest rates will be burdensome to companies. Consequently, capital expenditure growth is expected to slow in 2006. |
| Population (millions) |
291.4 |
294.1 |
296.8 |
| GDP (USD billions) |
$11,004 |
$11,735 |
$12,446 |
| Per capita GDP (USD) |
$37,764 |
$39,901 |
$41,936 |
| Real Growth in GDP |
3.0 |
4.4 |
3.5 |
| Inflation (CPI) |
2.3 |
2.7 |
2.9 |
| Exchange Rate (USD) |
1.00 |
1.00 |
1.00 |
| Exchange Rate (CAD)** |
0.71 |
0.77 |
0.81 |
| Current Account (GDP) |
-4.8 |
-5.7 |
-6.5 |
| Fiscal Balance/GDP |
-3.6 |
-3.4 |
-2.6 |
| Short-term interest rate |
1.0 |
1.4 |
3.1 |
| **Source : Bank of Canada, 2003, 2004 & 2005 |
| Source : Global Insight, World Overview, 2005. *Forecast |
Source : Canadian Embassy, Washington |
Economic Structure
| GDP by sector |
agriculture: 0.9%
industry: 19.7%
services: 79.4% |
Key Imports |
agricultural products, industrial supplies, capital goods, consumer goods (2003) |
| Major Industries |
petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods |
Major export destinations |
Canada 23%, Mexico 13.6%, Japan 6.7%, UK 4.4%, China 4.3% (2004) |
| Key Exports |
agricultural products, industrial supplies, capital goods, consumer goods |
Major import sources |
Canada 17.1%, China 13.7%, Mexico 10.4%, Japan 8.8%, Germany 5.2% (2004) |
| Source: CIA World Factbook, June 2005 http://www.cia.gov |
Economic Policies |
Foreign direct investment |
| The federal budget deficit will expand in fiscal year 2005/06 and interest rates will continue to rise. The deficit in 2005/06 was already expected to widen. Tax receipts will rise more slowly as the softening economy limits growth in revenue, while spending will continue to rise for defence, homeland security and most discretionary programs. Rising interest rates will mean that debt-service costs will continue to become more of a burden than in recent years. Now, hurricane related clean-up costs will be added to the budget. |
"The US is the largest foreign direct investor in the world: the stock of US-owned foreign direct investment (FDI) in other countries in 2003, measured at market values, was US$2.7trn. Foreign-owned FDI in the US was valued at US$2.4trn in 2003. The sharp growth in FDI in the US in the 1990s reflected the numerous investment opportunities generated by the booming economy as well as being one of the counterparts of the burgeoning US current-account deficit. However, stocks of foreign-owned FDI in the US have stagnated in recent years as FDI inflows have ebbed." |
| Source : Canadian Embassy, Washington |
Source : Economist Intelligence Unit, 2004, http://eiu.com, Country Profile US |
Trade Agreements and Canadian Trade with the United States
- Membership in trade agreements and other multilateral or trade agreements.
The United States is a member of numerous international organizations, inluding the United Nations, the World Trade Organization and the Organization for Economic Cooperation and Development and is signatory to a wide range of bilateral and multilateral trade and economic agreements, including the North American Free Trade Agreement.
- Main Canadian exports to United States; sectors, products and services.
In 2004, leading exports to the US were energy, including natural gas and petroleum products (US$ 50.4 billion), transportation equipment (US$ 74.2 billion, of which automobiles amounted to US$ 36.8 billion), forest products (US$ 23.9 billion) and chemicals (US$ 15 billion).
- Main Canadian imports from United States; sectors, products and services.
The predominant imports are: transportation equipment (US$ 51.7 billion), metals (US$13.5 billion), chemicals (US$14.8 billion), electrical equipment (US$12.6 billion) and machinery (US$12.7 billion) |
| Source :Statistics Canada |
The Most Dynamic Market in the World: Challenges and Opportunities
The United States, given its market size, high per capita GDP, proximity and similar business infrastructure, is the obvious international market for Canadian companies. The two-way trading relationship, already the largest such economic partnership in the world, has expanded at a rapid rate since the launch of NAFTA. However, in addition to being the world's wealthiest market, the United States remains the most competitive one and Canadian companies will not only have to meet the challenges of domestic producers, but also of other international players drawn to this market which continues to enjoy robust growth for an industrialized country. The fall-out of Hurricanes Katrina and Rita will continue to be felt in the economy for the short term as unemployment and reconstruction costs take their toll. More than 60% of US shipping travels through the Port of New Orleans and until the port facilities are restored there will be significant delays and costs associated with moving products along the inland waterway system. Another significant ongoing cost is the expense related to the American presence in Iraq. US competitiveness is being adversely affected by health care and pension costs and US companies are only coming to terms with these issues now.
The rate of inflation is expected to pick up over the next year and a half reflecting higher oil prices, consequential higher production costs in most industries, likely slowing of productivity growth and unit labour costs creeping upward . In 2005, the US dollar recovered some ground lost over the 2001-2003 period. However, the dollar is expected to weaken further in 2006 and 2007. The current account deficit remains a significant fault line in the US economy and is expected to widen in 2005 and 2006. |
| Source: Canadian Embassy, Washington, DC |
Additional sources of economic information on United States:
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