U.S. economy to see faster growth after winter freeze: OECD

Tue May 6, 2014 5:35am EDT
 
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By Lucia Mutikani

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.   Continued...

 
Tourists pose for a photo with the Charging Bull during a morning snow in New York's financial district near Wall Street February 13, 2014. REUTERS/Brendan McDermid