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United States of America

United States of America

Population 319.1 million
GDP per capita 54,370 US$
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2013 2014 2015 (f)  2016 (f)
GDP growth (%) 1.5 2.4 2.4 2.2 
Inflation (yearly average) (%) 1.5 1.6 0.1 1.1
Budget balance (% GDP) -4.7 -4.1 -3.8 -3.6
Current account balance (% GDP) -2.3 -2.2 -2.6 -2.9
Public debt (% GDP) 104.8 104.8 104.9 106.0

 (f) Forecast

STRENGTHS

  • Labour market flexibility
  • Full employment is also one of the Federal Reserve’s objectives
  • Predominant role of the dollar in the global economy
  • Nearly 60% of the public debt held by residents
  • Growing energy self-sufficiency

WEAKNESSES

  • Low employment rate
  • Households’ limited geographic flexibility
  • Polarisation of political life
  • Declining fertility rate
  • Obsolescence of many infrastructures

RISK ASSESSMENT

Households consumption is boosting growth

In 2015, growth remained sustained despite a first quarter marked by a very rigorous winter and major strikes by dock workers on the west coast. Unemployment continued to decline in 2015 and reached 5%, pointing to a rise in the employment rate (62.5%) in 2016, which remains lower than its pre- financial crisis level (66% on average between 2003 and 2007). As these two conditions are met, the US central bank (Fed) decided to put an end to seven years of ultra-expansionary monetary policy by raising its main key interest rate in December 2015. The rate increases will probably be very gradual in 2016 and will not affect household confidence. As in 2015, private consumption will be the largest contributor to growth. Car sales have reached historically high levels and will remain significantly above 18 million vehicles in 2016. The SUV segment will benefit from the further fall in the price of Brent in 2016, with consumers benefiting from the reduction in their energy bill. Moreover, Americans’ real wage will continue to increase by around 1% in 2016 due to the still very low inflation. Furthermore, the length of granted car loans has tended to increase (more than 72 months), noticeably increasing households’ purchasing capacity. The increase in subprime risk car loans must however be monitored amid an increase in interest rates. Residential investment will remain particularly vigorous, as all the leading variables for the sector are upbeat at end-2015 (housing starts, building permits, mortgage loans). Real estate prices will continue to grow and move closer to their pre-crisis level by end-2016. With regard to companies, investment in modernisation will underpin growth as the US productive system is ageing. The energy sector will continue to suffer from the fall in oil prices. Shale oil producers are concentrating on the wells providing the highest returns in order to limit their costs. So in 2015, more than 60% of the wells have been closed and unconventional oil production is likely to decrease in 2016. Despite this damaged sector, company insolvencies will continue to be less than 23,000 companies in 2016. This good trajectory is explained by a debt level of 41.5% of GDP, which is far lower than the average for the eurozone countries (65%), and by corporate earnings that will remain higher than 10.5% in 2016. They are falling moderately as a trend because of the appreciation of the US real effective exchange rate, which is hurting US companies that repatriate their profits from abroad. The sectors showing the best risks are automotive, textile and clothing and transport due to the good performance of domestic consumption. Companies in the chemicals sector are also benefiting from the fall in the oil price to increase their margins.

 

The dollar likely to remain strong

The gradual tightening of US monetary policy while the European Central Bank is easing its own policy could drive up the dollar further against the single currency in the first half of 2016. This high level will probably increase the cost of US products amid a muted rebound in the European and Japanese partner economies. As for Chinese growth, it will continue to slow down. This international context will therefore weigh on export growth. The vigour of imports will continue to outweigh that of exports due to the fall in the cost of foreign products and the good trend in US demand. As a result, the US current account deficit will increase in 2016.

 

The public debt remains very high while the presidential election looms

The fiscal deficit will remain high in 2016 in a context of presidential elections in November. Nevertheless, a few developments remain possible, in particular a revision of the long-term federal financing (Highway Trust Fund) of the US road system which accounts for around 25% of the spending. Congress has not succeeded in modifying the text linked to this spending for 10 years. It has since then been subject to minor adjustments 36 times. The public debt is on a worrying trajectory since it accounts for 104.9% of GDP end-2015 and will continue to grow in 2016. November 2016 will be marked by new US elections. The outgoing President Barack Obama is finishing his second term and can therefore not run again. The candidates will be known in July 2016 at the end of the primaries of the two large national parties. These will start in January and will take place in each of the country’s states.

 

Last update : January 2016

Payment

Exporters should pay close attention to sales contract clauses on the respective obligations of the parties and determine payment terms best suited to the context, particularly where credit payment obligations are involved.

In that regard, cheques and bills of exchange are very basic payment devices that do not allow creditors to bring actions for recovery in respect of “exchange law” (droit cambiaire) as is possible in other signatory countries of the 1930 and 1931 Geneva Conventions on uniform legal treatment of bills of exchange and cheques.

 

Cheques are widely used but, as they are not required to be covered at their issue, offer limited guarantees. Account holders may stop payment on a cheque by submitting a written request to the bank within 14 days of the cheque's issue. Moreover, in the event of default, payees must still provide proof of claim.

 

“Certified checks” offer greater security to suppliers since the bank certifying the cheque thereby confirms the presence of sufficient funds in the account and makes a commitment to pay it.

 

Although more difficult to obtain and therefore less commonplace, “cashiers checks”, cheques drawn directly on a bank's own account, provide complete security as they constitute a direct undertaking to pay from the bank.

 

Bills of exchange and promissory notes are less commonly used and offer no specific proof of debt.

 

The open account system is only justified after a continuing business relationship has been established.

 

Transfers are used frequently especially via the SWIFT electronic network – operated by the Society for Worldwide Interbank Financial Telecommunication – to which most American banks are connected and which provides speedy and low-cost processing of international payments.

SWIFT transfers are particularly suitable where real trust exists between the contracting parties since the seller is dependent on the buyer acting in good faith and effectively initiating the transfer order.

 

For large amounts, major American companies also use two other highly automated interbank transfer systems – the Clearing House Interbank Payments System (CHIPS), operated by private financial institutions and the Fedwire Funds Service System, operated by the Federal Reserve.

 

Debt collection

 

American law is inspired by the « common law » system, an Anglo-Saxon inheritance, based on doctrine, custom and case-law.

 

Since the American legal system is complex and, especially as regards lawyers’ fees, costly, it is advisable to negotiate and settle out of court with customers wherever possible or else hire a collection agency.

 

The parties can also resort to arbitration or Alternative Dispute Resolution (ADR), a relatively informal mediation method, which makes it possible to avoid costly and lengthy ordinary court procedures.

 

The judicial system comprises two basic types of court: the federal District Courts with at least one such court in each State and the Circuit or County Courts under the jurisdiction of each State.

 

TheFederal Rules of Civil Procedurepromulgated by the Supreme Courton September 1938 and regularly amended govern the various phases of civil procedure at the federal level while each Statehas its own rules of civil procedure.

 

The vast majority of proceedings are heard by State courts, which apply state and federal law to disputes falling within their jurisdictions (i.e. legal actions concerning persons domiciled or resident in the State).

 

Federal courts, on the other hand, rule on disputes involving State governments, cases involving interpretations of the constitution or federal treaties and claims above 75,000 US$ between citizens of different American States or between an American citizen and a foreign national or foreign State body or, in some cases, between plaintiffs and defendants from foreign countries.

 

A key feature of the American judicial system is the pre-trial "discovery" phase whereby each party, before the main hearing, may demand evidence and testimonies relating to the dispute from the adversary before the court hears the case. During the trial itself, judges give plaintiffs and their lawyers a considerable leeway to produce pertinent documents at any time and conduct the trial in general.

This is an adversarial procedure, where the judge has more the role of an arbitrator, ensuring compliance with the procedural rules, although more and more practice enhances the part of the judge in the running of the case.

 

An amendment to the Federal Rules of Civil Procedure, in force since 1st December 2006, authorizes document submissions in electronic form (e-discovery) like e-mail, real time computer communications, accounting databases, Internet sites, and so on.

 

The “discovery phase”can last several months, even years, and entail high costs due to each adversary’s insistence on constantly providing pertinent evidence (argued by each party), and involve various means – like examinations, requests to provide supporting documents, the testimony of witnesses, and reports by detectives – before submitting them for court approval during the final phase of the proceedings.

 

Another feature of the American procedural system is that litigants may request a civil or criminal case to be heard by a jury (usually made up of twelve ordinary citizens not familiar with legal aspects – “twelve goodmen and true”according to the popular definition of “jury”) whose task is to deliver a verdict based overall on the facts of the case and the evidence produced during the proceedings.

 

In civil cases, the jury determines whether the demand is justified and also determines the penalty to impose on the offender. In criminal cases, the jury decides on the defendant’s guilt but the judge decides the punishment.

 

For especially complex, lengthy or expensive litigation, as in the case of insolvency actions, courts have been known to allow creditors to hold as liable the professionals (e.g. auditors) who have counselled the defaulting party, where such advisors have demonstrably acted improperly.

Insolvency trend United States of America 2015
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