IMF reduces outlook for U.S. economy

The International Monetary Fund cut its outlook for the U.S. economy, removing assumptions of President Donald Trump’s plans to cut taxes and boost infrastructure spending to spur growth.

The IMF reduced its forecast for U.S. growth this year to 2.1 percent, from 2.3 percent in the fund’s April update to its world economic outlook. The Washington-based fund also cut its projection for U.S. growth next year to 2.1 percent, from 2.5 percent in April.

The world’s biggest economy will probably have a hard time hitting Trump’s target of 3 percent annual growth as it’s faced with problems ranging from an aging population to low productivity growth, and with a labor market already at full employment, the fund said in its annual assessment of the U.S. economy released Tuesday.

Given broad uncertainty on policy, “we have removed the assumed fiscal stimulus from our forecast,” Alejandro Werner, director of the IMF’s Western Hemisphere Department, said at a news briefing in Washington.

The IMF’s assessment casts doubt over a more optimistic forecast in the White House budget proposal, which projects growth will accelerate to 3 percent by 2020 and keep up that pace for seven more years. Even with an “ideal constellation of pro-growth policies, the potential growth dividend is likely to be less than that projected in the budget and will take longer to materialize,” the IMF said in a statement Tuesday.

Growth surges on the scale Trump is predicting have been rare in the U.S. and abroad, according to the IMF, which says there are only a few cases of such leaps among advanced economies since the 1980s. Those episodes mostly took place in the mid- to late-1990s, when global demand was strong, and many of the cases came when economies were recovering from recessions, the IMF said. The only time the U.S. economy accelerated at such a pace came in the early 1980s, when it was recovering from a deep recession.

Also Tuesday, the Conference Board, a business research group, said Tuesday that its consumer confidence index rose to 118.9 this month from 117.6 in May. U.S. consumers became more confident in June — with more Americans pleased by current conditions but slightly less hopeful about what the next six months hold.

The gains suggest that many Americans expect the economy to keep expanding, although the pace of growth is unlikely to accelerate much.

In another development, U.S. home prices rose at a healthy clip in April, though the increase slowed a bit from the previous two months.

The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index climbed 5.7 percent in April, after increases of 5.9 percent in March and February.