What role the United States will be able to play in the global economy’s future is a most pressing issue. Many people have assumed the U.S. is still poised to rescue the world through its population’s consumption patterns. The reality is that consumers appear to be slowing down, and that may be a long-lasting trend. The recession has altered expectations for an entire generation, and that constrains domestic growth. The evidence thus far is the Millennial is not the consumer that Boomers were. That has already had profound implications for sectors like housing and the automotive community. That record-setting year of vehicle purchasing was great, but the sobering reality is that more than 75% of the cars bought were purchased by Boomers and members of Gen-X.
Fed Not Expected to Hike Rates until Summer
But, what do we know. Last year, economists were convinced that rates would come up in June and then September was seen as certain. When the Fed finally did hike rates in December, the assumption was that it would raise them again in March of this year. That is obviously not happening, and now the consensus view is that they will rise by another quarter point in the summer—unless of course they don’t. The fact is the Fed is just not seeing the pressure that usually prompts it to act—no inflation and no real signs of it emerging any time in the near future.
Where Will Progress Come From?
There are several groupings as far as the global economy is concerned. There are the formal ones like the EU and the ones based on some kind of trade connection such as NAFTA (the North American Free Trade Agreement) or OPEC (the Organization of the Petroleum Exporting Countries). Right now, the contribution from Europe is minimal, and there have been issues as far as Asia and certainly the Middle East. Where is the growth going to come from? Right now, the only sector healthy enough to make that claim is North America, but there are plenty of qualifiers given the ongoing struggles of Mexico, Canada and the U.S.
- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence