Key Facts

GDP (ppp) per CAPITA

$46,900 (2008 est.)

Inflation Rate

3.8% (2008 est.)

Population

307,212,123 (July 2009 est.)

Country Risk Ratings

A2

Ease of Doing Business

3/181

Global Competitiveness

1/134

United States Risk Assessment

Country Rating

Rating: A2

Risk Assessment

In the United States (A2 since March 2009), the collapse of exports, investment, construction, and production continued in the 2009 first quarter with the economy thus contracting by 1.4 per cent (or an annualised 5.5 per cent) compared to the previous quarter and by 2.5 per cent compared to the first quarter last year.

A few indicators tuned green in April and May albeit weakly: increases in building permits and new housing starts for single family homes, increased confidence of companies and households, slight increase in retail sales, marked easing in the pace of the labour market deterioration, and improvement in financial asset values. But other indicators continue to flash red: acceleration of defaults on subprime and prime property loans and concomitantly of property repossession orders (albeit mitigated by various moratoriums) driving housing prices down, acceleration also of defaults on car loans and credit cards; increase in interest rates on mortgage loans, and rebound of petrol prices.

And the negative trends continue to largely overwhelm encouraging signs. Our scenario thus remains based on a 2.9 per cent economic contraction in 2009 followed by improvement in 2010 and resumption of positive (0.9 per cent) growth. Although household disposable income has registered a substantial increase thus far in 2009 (particularly in April and May) thanks to various government support measures, it will likely undergo an equally substantial contraction for the rest of the year. In view of the time lag apparent last year between receipt of fiscal incentives by households and the actual spending, the benefit of the recent fiscal stimulatory measures will likely be more visible in the third quarter. Amid the continuing growth of unemployment and fall of asset values, notably property, and with petrol prices moreover trending up, households will continue to exercise caution on spending. The old-car scrapping incentive that goes into effect in September could, however, spur car sales. The spectacular rise of the savings rate since spring 2008 (5.7 per cent in April) attests to the current cautious attitude of consumers and the priority they continue to give to paying off debt that remains nonetheless high at 128 per cent of disposable income despite a six-point decline since mid-2007.


Pending improvement in the trend for new orders, companies will continue to adjust their stocks accordingly and postpone their investments in capital equipment and software, already down 30 percent in the six-month period through March 2009. The drastic reductions made by large companies in their costs — production, dividend distribution, stock repurchase, for example — are expected to limit the decline in profits (down 13.4 per cent in the first quarter year on year) and, by improving internal resources, reduce their external financing needs. While the marked increase in corporate bond issues since the third quarter last year may have increased the proportion of medium-term debt, it has facilitated reducing short-term debt to banks. Smaller companies will continue to suffer, meanwhile, from the severe credit crunch with bankruptcies expected to continue — up 64.3 percent in the first quarter — with the sectors hit hardest including automotives (dealers and partsmakers), construction, and consumer staples including not only clothing, furniture, and leisure but even food products.


Some sectors, like mechanicals and public works, are nonetheless expected to begin to benefit late this year from the vast infrastructure modernisation programme launched by the new administration and local communities. The federal government's fiscal deficit and debt will grow, reaching respectively 13.2 per cent and 77.7 per cent of GDP.

STRENGTHS

• A large market that attracts investors and companies.
• Besides inflation, the Federal Reserve Bank also bases monetary policy on economic activity.
• Corporate reactivity and flexibility rest on the substantial sector and geographic mobility of the work force and the flexibility of labour legislation.
• The quality of higher education and universities and the size of the high technology sector contribute to maintaining R&D at a high level and foster the capacity to innovate.

• The economy is highly dependent on property and financial asset values.
• The decline in the traditional manufacturing industry tends to keep the current account balance in deficit.
• Very large energy needs makes it crucial to allocate resources to investments focused on adapting to environmental constraints.
• Demographic pressures have exposed the inadequacy of health and retirement financing systems.
• The poor condition of infrastructure tends to undermine corporate competitiveness.

Risk data and methodology courtesy of Coface (11/2009) .