US economy gaining steam
Air Marshal Ayaz A Khan (R)
US economists and the media, including New York Times. Los-Angeles Times, Wall Street Journal, Herald Tribune have acknowledged US economic growth in 2011. The Standard and Poor's 500 index is outpacing the stock bench marks in Frankfurt, Sao Paulo, Tokyo, Shanghai, and Hong Kong by 15 percentage points or more this year." The Dow industrials rose 135.63 points on improvements in the housing and employment sectors. Fewer Americans are filing new jobless claims than at any time, The consumer index is improving, an indicator for end to recession. This is the latest positive signal for the US economy.
The US economy had started slowing down in 2007. The mortgage crisis began to weigh down on Wall Street in late 2007. US stocks nose dived in 2008, with pessimists forecasting 1930's recession. Massive job losses, the automobile industry collapse and bankruptcy, the mortgage scandals, bank closures, hundred's of thousands becoming jobless, provided evidence of implosion from within. America could become another Soviet Union. In 2008 on Wall Street US stocks fell more steeply than else where. It was argued that in Asia, China, Japan, India, South Korea and economy of Asean countries had "decoupled" and will grow despite slow down of the world's largest economy. By 2008 the woes of the US financial system had spread around the world, dragging down global stocks and casting doubts on the decoupling thesis. Now the Euro has hit a 15-month low against the US Dollar, as Europe's sovereign-debt problems continued to wear away investors confidence. After Greek and Portugal the Italian economy is in a mess. The cost of funding Italy's long term debt remained high, shying away rich European countries especially Germany and France to help Italian governments efforts to fend off public rallies against governments austerity measures. Even Italy's flourishing auto industry is in trouble.
Four years later the decoupling is moving the US economy in the right direction. "Investors bet on the ability of the US economy to power through Europe's sovereign debt crisis." And concerns in Asia about inflation and sharp slowdown in growth is helping the US economy. The Japanese auto industry, world leader till recently is under pressure because of the over priced Japanese Yen." Honda has decided to shift four Honda manufacturing units out of Japan to the US and Mexico. In the US Honda sales are now behind the Korean Hyundai automobiles.
For much of the 2011, the US stock market served as a safe heaven, largely because of the propensity of US investors to bring back funds from overseas during times of uncertainty. Federal Reserves accommodating policies and resolve of the Federal government to bail out the automobile industry, has brought the US economy back on rails.
In 2009 the automobile industry was near collapse. The big three- General Motors, Ford and Chrysler were in the red. To save GM and Chrysler form insolvency these were allowed to borrow 30 billion and 20 billion dollars respectively, but the state became the bigger share holders. Within two years both the auto giants have reshaped themselves, and in 2011 they returned the massive loans with interest. Ford did not borrow, but overhauled it self. Today the US auto industry is producing better designed and fuel efficient vehicles, and is edging Toyota and Honda, and making big profits.
The redesigned US compacts are better, solidly built and have lower fuel consumption and reliability. The Japanese automobiles were in serious trouble with the recall of 20 million Toyota's Corolla, Camry, Highlander and the latest Preius hybrid cars for modifications to fuel systems and accelerators. Honda also recalled half million compacts and SUV's.
The US economy is ending the year of financial uncertainty on a positive note. The unemployment figures recorded by the US Department of Labour and economists indicate the lowest levels of unemployment since June 2008, when he US economy was mired in recession. The unemployment data, along with positive figures from the housing and manufacturing sectors, suggest that the economic recovery is once again gaining momentum after nearly stalling earlier this year (2011). Economic statistics have consistently shown the growth of the US economy, albeit slowly.
Michael Gapen, an economist with Barclays Capital states, "the economic growth is durable. It may not be robust, but it is expansion. Fewer people are loosing jobs, not that more people are being hired, but this is a positive indicator for the economy. Detailed report on State of the Labor market will be release by mid January 2012.
The manufacturing sector is showing signs of strength. Manufacturing activity in the industrial Midwest rose sharply in November 2011,and remained steady in December. The National Association of Realtors have reported that, pending homes sales rose sharply in November in more than a year, and rose for the third consecutive month. It was up 6% from November 2010. Home construction is picking up and sale of existing and new homes are on the rise. The consumer shopping is the highest since two years. The European debt crisis had no effect on the US economy so far. But continuing economic crisis in Europe, Economic slow down in Japan and signs of economic slow down in China, partisan gridlock in Washington and budget cuts by states and local governments will have adverse impact on the US economy. Positive economic indicators and steady economic growth is good for the Democrats. This will assure Barrack Obama's re-election as President of the United States of America for the second term.
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