IMF warns of challenges to US economy

The US faces economic "headwinds" and "pernicious" trends including a shrinking middle class that could slow growth in the long term, the International Monetary Fund (IMF) has warned.

In their annual assessment of the US economy, IMF economists said the country was in “good shape”, citing 2.4 million jobs created in the past year and said slowing growth in recent quarters had been temporary.They predicted US GDP would grow 2.2 per cent this year, down from 2.4 per cent in 2015.

But the IMF offered a sobering long-term view, warning that recent weak employment and other data may reflect daunting longer term trends. It also warned the US dollar was now 10-20 per cent overvalued and that a decision on Thursday by UK voters to leave the European Union could lead to a further appreciation as investors poured into the currency as a haven.

Christine Lagarde, IMF managing director, said the US economy was facing four forces "that pose a challenge to future growth" – the declining labour force participation rate, falling productivity, increasing polarisation in income distribution and a high share of the population living in poverty. - Copyright The Financial Times Limited 2016