Last Friday, Lucia Mutikani of Reuters said that, €Economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a slower pace, but stronger demand for automobiles softened the blow.€
The same day, it was announced that the US economy €" currently the world's largest €" grew by 2.2%, compared to the predicted 2.5-3%. This comes on the back of poor job creation numbers for March (just 120,000) and economic contraction in most major economies, including the UK which posted a -0.2% contraction.
Although more shielded from the headwinds of the Eurozone crisis, the United States is not immune to them. Consumer spending which accounts for about 70% of US economic activity, increased by 2.9% €" the fastest pace since the fourth quarter of 2010. That compared to a 2.1% rise in the final quarter of 2011.
There was slowed growth in business investment and government defence spending, even though government debt is increasingly exponentially. Business spending fell by 2.1% after rising 5.2% in the final quarter of 2011.
Some gauges of regional factory activity eased as the second quarter started, while consumer confidence ebbed. First-time applications for unemployment benefits have spiked in recent weeks, although many economists attribute the rise to seasonal quirks.
Americans stepped up spending on automobiles in the first quarter, with motor vehicle sales rising by the most in four years. Part of that reflected demand after last year's earthquake and tsunami in Japan disrupted supplies and left showrooms without popular models.
Corporate spending on equipment and software climbed by 1.7%, the weakest in almost three years, after advancing 7.5% in the previous quarter. It contributed 0.1% to growth. Rising auto and industrial demand will keep factories busy even as manufacturing €" a driver of the economic rebound €" cools to a sustainable pace.
Inventories contributed 0.6% to GDP growth after 1.8% at the end of 2011. Stockpiles were rebuilt at a $69.5 billion annual pace, after a final quarter rate of $52.2 billion. The trade deficit was little changed at $410.1 billion. Excluding inventories, GDP rose by 1.6% against 1.1% in the previous quarter.
Data coming from the US seems to suggest that overall public debt is increasing dramatically. It is around $15.7 trillion at the time of writing, with a public deficit growing and now around $1.325 trillion. Debt-to-GDP is growing and stands at around 103% (the importance of this figure depends on how important one considers GDP to be).
Unfunded liabilities are going up fast. At the time of writing $118.6 trillion is needed for future social security and healthcare costs. The US is almost certain to default on these. Interestingly however overall federal and state spending is falling, including in Medicare and defence, even though it is going up for social security. The amount of debt held by foreigners and the trade deficit are also up, although private and corporate debt are falling.
Niall Ferguson €" the British historian, who previously warned of America's impending debt crisis €" has clarified his position, in arguing that as a superpower with the world's reserve currency, the US can run higher debts than other countries.
He insists that while the US will default on its unfunded liabilities, it could grow and inflate away its debt €" although that has been disputed elsewhere, since higher inflation and interest rates could push up both social security costs and the amount of debt which needs repaying.
Ferguson also argues that the current crisis in Europe is buying America time. Compared to Europe, America is a comparative safe haven. That said there will come a point when America will have to get its debt under control. Meanwhile America's position as the sole superpower and the dollar acting as the world's reserve currency could change.
The same day, it was announced that the US economy €" currently the world's largest €" grew by 2.2%, compared to the predicted 2.5-3%. This comes on the back of poor job creation numbers for March (just 120,000) and economic contraction in most major economies, including the UK which posted a -0.2% contraction.
Although more shielded from the headwinds of the Eurozone crisis, the United States is not immune to them. Consumer spending which accounts for about 70% of US economic activity, increased by 2.9% €" the fastest pace since the fourth quarter of 2010. That compared to a 2.1% rise in the final quarter of 2011.
There was slowed growth in business investment and government defence spending, even though government debt is increasingly exponentially. Business spending fell by 2.1% after rising 5.2% in the final quarter of 2011.
Some gauges of regional factory activity eased as the second quarter started, while consumer confidence ebbed. First-time applications for unemployment benefits have spiked in recent weeks, although many economists attribute the rise to seasonal quirks.
Americans stepped up spending on automobiles in the first quarter, with motor vehicle sales rising by the most in four years. Part of that reflected demand after last year's earthquake and tsunami in Japan disrupted supplies and left showrooms without popular models.
Corporate spending on equipment and software climbed by 1.7%, the weakest in almost three years, after advancing 7.5% in the previous quarter. It contributed 0.1% to growth. Rising auto and industrial demand will keep factories busy even as manufacturing €" a driver of the economic rebound €" cools to a sustainable pace.
Inventories contributed 0.6% to GDP growth after 1.8% at the end of 2011. Stockpiles were rebuilt at a $69.5 billion annual pace, after a final quarter rate of $52.2 billion. The trade deficit was little changed at $410.1 billion. Excluding inventories, GDP rose by 1.6% against 1.1% in the previous quarter.
Data coming from the US seems to suggest that overall public debt is increasing dramatically. It is around $15.7 trillion at the time of writing, with a public deficit growing and now around $1.325 trillion. Debt-to-GDP is growing and stands at around 103% (the importance of this figure depends on how important one considers GDP to be).
Unfunded liabilities are going up fast. At the time of writing $118.6 trillion is needed for future social security and healthcare costs. The US is almost certain to default on these. Interestingly however overall federal and state spending is falling, including in Medicare and defence, even though it is going up for social security. The amount of debt held by foreigners and the trade deficit are also up, although private and corporate debt are falling.
Niall Ferguson €" the British historian, who previously warned of America's impending debt crisis €" has clarified his position, in arguing that as a superpower with the world's reserve currency, the US can run higher debts than other countries.
He insists that while the US will default on its unfunded liabilities, it could grow and inflate away its debt €" although that has been disputed elsewhere, since higher inflation and interest rates could push up both social security costs and the amount of debt which needs repaying.
Ferguson also argues that the current crisis in Europe is buying America time. Compared to Europe, America is a comparative safe haven. That said there will come a point when America will have to get its debt under control. Meanwhile America's position as the sole superpower and the dollar acting as the world's reserve currency could change.