The U.S. economy is booming, and the ripple effects are being seen throughout the world as countries attempt to take advantage of a strong American sector. Smaller economies may not be able to handle all these new opportunities but will have no choice but to contend with them anyway or risk stagnation in their own populations too long for any real growth potential.
The “how strong is the u.s. economy today” is a question that many people are asking. The U.S. economy has been booming in recent years, and it’s ripple effects have been felt around the world.
FRANKFURT— A rising US economy is sending shockwaves throughout the globe, sucking in imports, straining global supply networks, and driving up prices.
The power of American development is also enticing foreign corporations to invest in the United States, believing that growth will continue to accelerate and outperform that of other major countries.
Consumers in the United States are snatching up manufactured products and rare commodities, thanks to billions of dollars in fiscal stimulus.
According to preliminary production projections released by the Federal Reserve Bank of Atlanta, the US economy would grow by more than 7% annually in the last three months of the year, up from roughly 2% in the previous quarter. According to JPMorgan Chase, annualized growth in the eurozone is forecast to be about 2%, while growth in China is predicted to be over 4% in the fourth quarter.
While volumes at key European ports like Hamburg and Rotterdam are approximately flat or trail behind 2019 levels, major U.S. ports are processing over one-fifth more container traffic this year than they were in 2019. According to shipping data firm Alphaliner, the busiest U.S. container ports are leapfrogging their Asian and European counterparts in worldwide rankings as volumes soar.
In a speech last month, Fabio Panetta, a member of the European Central Bank’s six-member executive board, claimed that “durable goods consumption in Europe is displaying nothing like the boom that is continuing in the United States.” According to ECB statistics, durable goods consumption in the United States has increased by roughly 45 percent above 2018 levels, but only by about 2% in the eurozone.
The demand for durable products has increased in the United States.
courtesy of Shutterstock/Justin Lane
Factory gate prices in China are far outperforming consumer prices, indicating a disparity between poor local demand and high international demand, which is fueled in part by the United States’ appetite for Chinese produced products.
While convoluted global supply networks contribute to global inflation, economists and central bankers are increasingly pointing to ultrastrong US demand as the main culprit.
“Are we driving customers away from other countries?” Aneta Markowska, chief financial economist at Jefferies in New York, replied, “Probably.” “As a consequence of fiscal policy, the American consumer has far greater buying power than consumers in other countries.” As a result, Europe may find itself in a stagflationary situation next year.”
According to statistics from the Bank of England, the United States accounted for about nine-tenths of the approximately 22-percentage-point increase in demand for durable goods among major advanced countries since the end of 2019.
“It was really high U.S. demand that created [global supply constraints],” said Lars Mikael Jensen, head of network at container ship company A.P. Moller-Maersk A/S.
“It’s like being stuck in traffic on the freeway.” Mr. Jensen said that the rise in volume in the United States “takes ships away from other markets.” “We live in a global world, and difficulties in one location will cause problems elsewhere.”
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Analysts predict that the US economy will rise by roughly 6% in 2021 and 4% or more in 2022, the greatest rates in decades. According to Deutsche Bank analysts, strong U.S. economic momentum would reduce the jobless rate to its lowest level in over seven decades by 2023.
According to JPMorgan Chase, US economic production will likely reach its pre-pandemic course early next year, but output in China and developing economies will stay around 2% behind that route through 2023.
According to figures from the Bank for International Settlements, a Swiss bank for central banks, salaries in the United States are increasing at a pace of roughly 4% per year, much above the pre-crisis trend rate, compared to less than 1% in the eurozone.
“We put a lot of assistance into [the economy], and what’s coming out now is very robust growth, incredibly strong demand, high earnings, and all that,” Federal Reserve Chairman Jerome Powell said during the central bank’s last meeting. “In 25 years, people will decide if we went overboard or not.”
The Fed said that it will reduce its Covid-19 bond purchases more swiftly, paving the way for a series of interest-rate hikes starting next spring.
Prices in Japan have remained low while the cost of food, clothes, and gadgets has risen in the United States. Peter Landers of the Wall Street Journal goes shopping in Tokyo to demonstrate why stable pricing, although good for your pocketbook, might signal a slowing economy. Kim Kyung Hoon/Reuters; Richard B. Levine/Zuma Press
The European Central Bank (ECB) said that it would continue to purchase bonds at least until October 2022, and that it will not increase interest rates next year. According to figures that compensate for the effect of the pandemic and variations in volatile food and energy costs, underlying U.S. inflation has grown over 3%, about twice the amount in the eurozone, during the last two years.
“The significant post-pandemic rebound that was projected for 2022 has yet to materialize,” said Timo Wollmershäuser, director of projections at Germany’s Ifo think tank. Due to continued supply difficulties and a fresh wave of Covid-19, the institute recently cut its growth prediction for Germany in 2022 by 1.4 percentage points, to 3.7 percent.
The Fed’s boldness is driving up the value of the dollar and putting pressure on emerging-market central banks to raise interest rates even before their economies have fully recovered, or risk seeing their currencies depreciate and inflation spiral out of control.
After inflation reached a 20-year high of 7.4% on Dec. 16, Mexico’s central bank said that it will raise its benchmark interest rate by 0.5 percentage point to 5.50 percent.
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After inflation touched a near six-year high of 8.4 percent on Friday, Russia’s central bank raised its benchmark interest rate by one percentage point to 8.5 percent, and suggested it would hike rates again soon.
Businesses are pouring money into the United States, hoping to profit from what some predict will be a long-term surge in demand. They are shifting manufacturing closer to American consumers in certain situations, in order to avoid supply shocks caused by the epidemic and global trade battles.
The recent fiscal boost in the United States “increases our confidence in the US market.” It makes it simpler to go into this, and it makes it easier for consumers to get into this,” said Marc Becker, CEO of Siemens Gamesa Renewable Energy SA, a wind-turbine producer located in Spain.
The business aims to spend more than $200 million in Virginia to produce offshore turbine blades, claiming it will be the first global manufacturer to commit to a U.S.-based supply chain.
According to JPMorgan Chase, equipment investment in the United States is predicted to increase by 13% this year. According to the bank, capital investment in the eurozone will likely climb by 3.6 percent this year, while corporate investment in Japan will rise by 0.1 percent.
The Port of Los Angeles in California is failing to keep up with the influx of cargo containers arriving at its ports, resulting in one of the world’s most serious supply-chain bottlenecks. The scale of the issue and the difficulties of the procedure are shown in this rare aerial footage. Thomas C. Miller is the photographer for this image.
According to Oxford Economics, two new US fiscal spending packages costing a combined $3 trillion may boost the American economy by 0.5 to 1 percentage point in each of the following two years, despite the fact that the bigger of the two measures’ future was put into question last weekend. Consumers, on the other hand, are continuing to spend money from previous stimulus packages.
Meyer Burger Technology AG, a Swiss solar module producer, wants to open its first facility in the United States by the end of next year, complementing its current manufacturing facilities in Germany. This is a significant shift for the solar sector, which now has around 80% of its manufacturing in China.
According to CEO Gunter Erfurt, the decision was influenced by rising shipping costs and quickly increasing demand in the United States. He claims that logistics costs are up to four times greater than they were before the outbreak.
“Customers in the United States see and feel that supply chains are fragile, and they no longer trust them.” Solar modules either don’t come or arrive late, according to Dr. Erfurt.
According to Oxford Economics, foreign direct investment into the United States has recovered beyond pre-crisis levels and has almost equaled foreign investment into China in the second quarter of 2021. According to the International Monetary Fund, the United States became the world’s biggest beneficiary of foreign direct investment in 2019 and maintained that position in 2020, owing to larger direct investments from Japan, Germany, and the Netherlands.
Mr. Becker of Siemens Gamesa stated, “Everybody in every business is presently examining whether it’s wise to produce just in China.” Long supply chains are vulnerable, he says, because of congested ports in China and increasing transportation costs.
Tom Fairless can be reached at tom.fairless@wsj.com.
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