O’Neill Says US Too Reliant on Consumers

The U.S. may not be as strong as investors think because it is growing overly dependent on the consumer for economic growth, said Jim O’Neill, former chairman of Goldman Sachs Asset Management.

“When the U.S. consumer is starting to be more than 70 percent of GDP, as it’s threatening to do again, the U.S. structural story is not as powerful as so many people seem to now believe it is,” O’Neill told CNBC on Thursday. “It was, but it’s weakening.”

A bull case emerged for the United States after the financial crisis in part because investors saw growth coming from structural improvement, rather than cyclical momentum, O’Neill said. The idea was the country would begin rebuilding its savings rate and shore up exports and investments as the consumer took a smaller role in fueling growth, he said.

That shift was beginning to take shape, but in the last year, signs are beginning to emerge that “the consumer is back to being king,” O’Neill said in a “Squawk Box” interview.

“In some ways, the reason we had the whole mess in the first place is because the U.S. consumer was too much of the king,” he said, referring to the financial and subprime mortgage crises.

He pointed to the role of oil production in improving the country’s balance of payments with the rest of the world. Last year, President Barack Obama’s Council of Economic Advisers highlighted strength in the American oil industry as one of three structural changes that would support sustained U.S. growth.

via CNBC

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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