US Slowdown Part of Global Trend

It would be easy to dismiss the slowdown in the US economy to near-stall speed as a piece of rogue data resulting from the inability of number crunchers at the Department of Commerce in Washington to take account of the fact that large parts of the country are blanketed by snow during the winter.

Easy but wrong. Back in spring 2015, the world’s biggest economy was expanding at an annual rate of 3.9%. In the third quarter the growth rate halved to 2%, before falling again to 1.4% in the final three months of the year. Describing the further easing to 0.5% in the first three months of 2016 as a temporary aberration – which was the knee-jerk response of upbeat analysts on Wall Street – is pushing it a bit.

A better explanation is that the sluggishness of US growth is part of a global trend, in which all the major economies are expanding more weakly than they were in the middle of last year. That’s the story for China, the eurozone, Japan and the UK.

Each quarter, the data company Markit compiles a global Purchasing Managers’ Index for JP Morgan, with the intention of providing an up-to-date picture of economic conditions. The result for the first three months of 2016 showed activity at its lowest level in more than three years.

Nor is there much hint of an improvement in the near future. In the US, firms are hacking back at investment – normally the sign of a looming recession. Consumer confidence has weakened, in part because real incomes are being squeezed.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza