Overseas economies on the whole still have not emerged from a deceleration phase but U.S. economic conditions have continued to improve moderately and the sluggish EuropeanThis really highlights the central problem faced by the US right now -- and, as a result, the world. Fist, consider the following charts of annual GDP growth:
economy has stopped deteriorating. Global financial markets have generally been stable
From the top down:
1.) Brazil's annual GDP growth rate is moving consistently lower
2.) The US's growth rate has been stuck at low rates for the last three quarters
3.) The euro area growth rate is slowing
4 and 5) China's and India's annual GDP growth rate is slowing (remember; both have large populations that they are trying to grow out of poverty; their respective growth rates must be higher than the developed world to continue that quest)
6.) Russia's growth never really returned to strong growth rates after the recession.
So, the world's developed economic areas (the US and the EU) are all slowing. The developing world is slowing to rates which are prohibitive for its desires to grow out of poverty.
In the above environment, how can the US grow at a strong rate? While exports have helped the US to grow, slowing economies obviously demand less. That means the US has to grow internally, which is less and less likely:
Consumers Are the Linchpin: The U.S. economy is being fueled these days by strong consumer spending, which increased in February by 0.8 percent, its best showing in seven months, after rising 0.4 percent in January. Retail sales rose 1.1 percent in February -- the fastest pace in five months -- while same-store sales advanced 4.7 percent. These numbers correlate with recent gains in consumer confidence and sentiment.
I don’t see this pace continuing. Personal-income growth continues to be weak -- up just 0.2 percent in February -- meaning this recent exuberant consumer spending is being fueled largely by increased debt and tapping of savings.
At the same time, pay per employee is rising slowly and continues to fall in real terms. So increased job growth remains the key to any increases in real household after-tax income, which declined in February for a second straight month and gained a mere 0.3 percent, compared with February 2011.