Latest news reports from the United States suggest that the US economy may be getting back on its feet. Oil prices have unexpectedly tumbled, business investment is picking up, the US dollar is now stronger, and the unemployment rate has fallen below 6%. According to an article, titled The U.S. Economy Will Soon See Its Best Years in a Decade, Forecasters Say, by Josh Zumbrun in yesterday’s Wall Street Journal:
“The White House, Congressional Budget Office and Federal Reserve unanimously see the nation on the cusp of the best years for the economy in a decade or more.
In its latest round of economic forecasts, released Monday with the president’s budget, the White House sees the unemployment rate falling below 5% by the end of 2016, the lowest since before the recession. The White House sees growth of 3% this year and in 2016–the best back-to-back years since 2004 and 2005.”
However, consumer spending, which accounts for a substantial portion of US economic activity, seems to be a problem. In another article yesterday, titled The $4 trillion question for the US economy, Jeff Cox of CNBC.com reports the following:
Image courtesy http://www.bloomberg.com
“Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, pointed out that in addition to energy, the consumer sectors also have been feeling the squeeze. It’s an observation not lost elsewhere on Wall Street.
“Consumers appear to be somewhat fatigued in their spending patterns, pulling back noticeably at the end of the year despite lower gas prices,” Lindsey Piegza, chief economist at Sterne Agee, said in a note. “In the end, low gas prices will provide only a temporary boost while the key equation in terms of long-term success remains organic job and sustainable income growth.””
For the rest of the world, which is waiting with bated breath for the US economy to improve, so their respective economies can follow suit, this does not augur well. I’m reminded of President Barack Obama’s declaration six years ago at the G20 Summit in London in April 2009, that the United States (or rather, the American consumer) can no longer be viewed nor accepted as the role model for driving global growth.
To me, it was a sad but fascinating submission. Fascinating from two perspectives: one, that, perhaps, the age-old American belief of hardworking risk-takers being rewarded meritoriously now stood under scrutiny; and two, if this were true, then, after years of following the American economic model, many countries across the globe were suddenly left to fend for themselves.
For many developing countries, like India, this was bad news indeed. For, these countries had been emulating the American capitalist model for several years and had become heavily dependent on exports to the US and other developed nations, reaping the benefits of trade, investment and currency exchange. Now, that very foundation was shaken.
For six years since President Obama’s declaration at the G20 Summit in London – and for another two years before that, since the global economic meltdown began in 2007 – that reality has humbled and haunted many a country. Left to fend for itself, each country has had to look inwards, protect jobs and businesses, increase demand and consumer spending, and reduce overall debt.
But expectations had grown. No doubt they had thought that, with God’s blessings, things would look up in a couple of years. It has been a long wait but, perhaps, that happy moment has come now. Perhaps, USA will light the day for the rest of the world in 2015 and hold it steady thereafter.
[Citation: The U.S. Economy Will Soon See Its Best Years in a Decade, Forecasters Say, Josh Zumbrun, The Wall Street Journal, February 2, 2015; The $4 trillion question for the US economy, Jeff Cox, CNBC.com, February 2, 2015.]
