AMERICA
F%@K YEAH
US Economy: It Could Be Worse, Just Look AbroadPosted by: Motif Investing on February 11, 2015 in Motif Spotlight
As a recent Associated Press article noted, China is slowing as it transitions from investment to consumption, Japan has slid into a recession, Russia appears headed for one, and Europe is barely growing.2
Meanwhile, even with a slowing fourth quarter, the US economy is still expected to grow 3.1% in 2015, according to a survey by the National Association for Business Economics cited by the AP.
Plunging oil prices have helped the optimism, as they’ve fallen by about 50% since the summer. The drop, along with more fuel-efficient cars, will save the average US household $550 on gas next year, according to the U.S. Energy Information Administration, the AP said. That means more money to spend on items like cars, furniture and appliances.
It’s also possible that a strengthening US economy could even hinder growth overseas. The AP said that faster growth will likely lead the Federal Reserve to raise interest rates in 2015, which could draw more investment from overseas. The inflow of capital would raise the dollar’s value and potentially cause destabilizing drops in other currencies. Governments and businesses overseas that borrowed in dollars would find it harder to repay those debts.
The AP said that the hot economies of the last decade – the emerging markets of Brazil, Russia, India and China collectively known as the BRICs – will likely grow in 2015 at their slowest pace in six years, according to Oxford Economics, a forecasting firm. Falling oil and commodity prices have smacked Brazil and Russia particularly hard.
While China may expand 6.5% or more, that’s a far cry from the nearly double-digit growth it enjoyed for decades, the AP said. Europe and Japan will be lucky to expand even 1%.
The AP suggested that the gap between the US and the rest of the world reflects a fundamental trait of our economy: It’s more insulated from the rest of the world’s ups and downs than other major economies are. Exports account for just 14% of U.S. output, the smallest share among the 34 mostly rich members of the Organization for Economic Cooperation and Development.
The AP even pointed to one US company largely protected from overseas trends: Globe Specialty Metals, a Miami-based producer of silicon metals, draws 90% of its revenue from North America. Its silicon is added to aluminum and rubber parts used in cars, and robust auto sales have boosted the company’s revenue.
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