IMF: US economy on better foundation, but tax increases, spending cuts still drag on growth

WASHINGTON – The International Monetary Fund says the U.S. economy is on sounder footing than it was a year ago but is still being restrained by government spending cuts and tax increases.

The IMF’s annual report on the U.S. economy says the underlying fundamentals are gradually improving: Home prices and construction are rising, household finances have strengthened and employers are steadily adding jobs.

Still, the IMF forecasts growth of just 1.9 per cent this year, the same as in its report in April. That would be down from 2.2 per cent in 2012. And it’s below many private economists’ expectations that the U.S. economy will grow more than 2 per cent this year.

The IMF says the tax increases and spending cuts that kicked in this year will shave about 1.5 percentage points from growth.