In the next few months, the U.S. economy is expected to grow at its fastest pace in a decade, thanks to an energy boom, steadily falling unemployment, and a rebound in corporate investments, according to the Organization for Economic Cooperation and Development (OECD). The Paris-based group said in its latest economic overview that U.S. gross domestic product would expand 2.5% this year and 3.5% next year — the strongest advance since 2004.
“The U.S. is the bright spot in the world’s recovery today,” OECD head Angel Gurria told Reuters. “The U.S. is the one country that has its own growth built in.”
Low energy prices and continued low borrowing costs, plus record corporate cash rates, should produce a surge of 10% business investment next year, according to OECD projections. Steadily falling unemployment will likely equate to rising consumer demand and a firm recovery in housing over the next year, the group predicts. The OECD believes steps taken to rein in federal spending and debt in recent years have been successful, with the drag on the economy from budget cuts diminishing and federal debt as a percentage of GDP stabilizing around 106%.
Despite the stronger growth, the OECD is forecasting a slow decline in unemployment, expecting joblessness to remain at 6% by the end of 2015, above the level typically regarded as full employment. Wage stagnation has continued to stunt demand and worsen income inequality, the group says. The OECD is calling for an increase in the minimum wage and tax law changes to help the situation.
The OECD is an economic policy organization that includes the world’s largest developed nations. The organization’s predictions are more optimistic on U.S. growth than other forecasters, including the World Bank, which expects growth of 3% next year.