The U.S. Economy May Not Support World Growth

Sputtering global growth, fueled by the collapse of commodity prices, China’s economic slowdown, and other factors, has many nations hoping to piggyback on the U.S. economy to bolster their own. However, the U.S. may not have sufficient strength to get the job done.

Nations seeking to travel the economic improvement road on the U.S.’ back cite both the shape of the U.S. economy and the contribution to global growth as justification here, according to The Wall Street Journal.

“The U.S. accounted for nearly 23% of global growth last year, its highest contribution since 2003.”

The World Bank estimates that the U.S. accounted for nearly 23% of global growth last year, its highest contribution since 2003. In 2016, the Bank predicted, the U.S. is expected to contribute a “still-strong” 21% of such growth. U.S. consumer spending adjusted for inflation increased by 3.1% last year, the fastest annual increase since 2005, and a recovering job market, coupled with low energy prices, is bolstering consumers’ spending power, the Journal said.

In a speech delivered in Washington, D.C. last week, World Bank COO Sri Mulyani Indrawani deemed the U.S. economy “the only engine of growth,” noting that Europe is grappling with Britain’s possible departure from the European Union. Japan, she observed, continues to experience only weak growth, and the emerging economies that were “the engine of growth during the last decade” are underperforming.

In a more specific vein, Armando M. Tetangco, governor of the central bank of the Philippines, recently told the Journal that the “vibrant outlook” in the U.S. could have “positive spillover effects” for Filipino importers.

This perspective isn’t limited to bank officials, however. Guillaume Deglise, CEO of Vinexpo, a French company that organizes trade fairs for the wine and spirits industry, told the Journal that his company is increasing its focus on the U.S. because it is “the leading consumer market.”

U.S. policy makers, economists, and officials, however, have “reasons to worry about the health of the U.S. economy despite a generally positive outlook,” according to Marketwatch.com. Wages have been stubbornly slow to increase since the recession ended, and business investment has had difficulty in rebounding. Exports took a deep dive at a seasonally adjusted rate of 2.7% in the fourth quarter of last year, after rising by only 0.7% in the third quarter.

“The world can’t depend on the United States to be the consumer of first and last resort,” Treasury Secretary Jacob Lew said in a recent Journal interview. “That’s not a powerful enough engine to drive the whole local economy. So there needs to be more demand in other places where there’s the capacity to generate it.”

At the recent Group of 20 (G20) meeting of top financial officials in Shanghai, attendees urged other nations to address economic growth woes not by looking to the U.S., but by encouraging faster consumption in other major economies. These economies include, but are not limited to, China and Germany, according to The New York Times.

Meanwhile, at a news conference on the sidelines of China’s annual legislative session last week, National Development and Reform Commission Chief Xu Shaoshi rejected claims that the Chinese economic slowdown is “dragging on” global growth and markets. Citing the 6.9% growth experienced by the nation’s economy and the high volume of commodities it is importing as its key contributors to global health, Xu said the world’s largest economy remains a source of “demand and vitality,” MarketWatch.com reported.

Julie Ritzer Ross :Julie Ritzer Ross has been covering all facets of business in a variety of vertical markets, including manufacturing, for the past 35 years and the use of technology in business for the past 25 years. A two-time winner of a Jesse H. Neal Award for business-to-business journalism, her work has appeared in such publications as MICROSOFT EXECUTIVE CIRCLE, CONSUMER GOODS TECHNOLOGY (formerly CONSUMER GOODS MANUFACTURER), VERTICAL SYSTEMS RESELLER, RESELLER MANAGEMENT, RIS NEWS, and INTEGRATED SOLUTIONS.