For 6 months or so I have been wondering about reasons for the (largely unexpected) strength of the US economy, as reflected in it’s strong share markets DOW, S&P and Nas.
It seems the US has been able to turn on a dime to rejig its economy in response to Covid pandemic circumstances, and China weaponising trade and “coming out” with expansionist aims and global aspirations during that period. That famed, intense focus on innovation and flexibility that has stood the US well since WWII, that lost confidence over the last decade or so, has found its mojo again it seems.
Going all in on new technologies and commitment to transitioning to renewables has the hallmarks of yet another global game breaking move by the US that could underwrite US predominance for decades to come. Ditto the use of AI to develop and run highly efficient, highly automated new manufacturing capacity in the US in response to the “on-shoring”movement to bring a sensible capacity increase and new jobs back to the US to reduce dependence on Chinese imports … surely an own goal from Xi’s post Covid policies and actions.
As of yesterday, we have the lofty G20 commitment to encourage, fund and develop interconnected infrastructure for a new “green corridor” between India and Europe for trade and transmission of renewables, to rival China’s Belt & Road initiative … surely another own goal from Xi’s post Covid policies and actions.
The following article would seem to support some of the above thoughts …
A long article, with meatier excerpts copied below …
[[[[[ FRANKFURT—The U.S. economy is chugging along while the rest of the world falls behind. Driving the division among the world’s most powerful economies: a slowdown in trade that is hurting some much more than others.
The waning of global trade flows is consolidating a growth gap among members of the Group of 20 largest world economies, whose leaders are meeting this weekend in India, resetting the global balance of economic power …
… The U.S., the world’s largest economy, is expanding at an annualized rate of nearly 6%, according to an early indicator produced by the Federal Reserve Bank of Atlanta. India’s economy grew 7.8% in the three months through June, the fastest pace of growth in a year. By contrast, growth in the more trade-dependent eurozone was barely positive in the most recent quarter, and the bloc’s economy is still languishing below its prepandemic growth path …
… “Global trade will be less global” in the future, with exchanges occurring more within regional blocs, said Holger Schmieding, chief economist at Berenberg Bank. It will also shift away from goods and toward services, he added, providing a boost to economies like the U.S. and India that specialize in IT and other services at the expense of manufacturing powerhouses like Germany and China …
… In China, exports declined by 8.8% in August from a year earlier, while imports dropped 7.3%, according to official data. That reflects trade restrictions, sluggish consumer demand and a crisis in the real-estate sector that threatens imports of commodities and other inputs.
Now that weakness is spilling over to the rest of Asia, with Japan and South-Korea, two large exporters, seeing a drop in trade. In a rapidly changing global economy, the flexible and more inwardly focused U.S. is an outlier. Despite signs that the labor market is cooling, consumer spending remains robust and manufacturing output appears to be holding up better than in other advanced economies. The U.S. is benefiting from a surge in factory investments as businesses increasingly locate production facilities close to customers and cheap energy sources.
By contrast, turnover is slumping at major European ports such as Hamburg, where container throughput declined by almost 12% in the first half of the year, compared with the same period a year earlier. Rotterdam’s first-half throughput was down around 8% while Antwerp-Bruges, Belgium’s major port operator, reported a 5% drop.
“With global demand for eurozone goods stalling this year, a sustained recovery isn’t likely to start until 2024,” said Angel Talavera, an economist at Oxford Economics.The trade trend looks set to persist. Danish shipping giant A.P. Moller-Maersk, often seen as a bellwether for global trade, last month reported a steep decline in second-quarter earnings amid plunging container rates. It warned of a deeper downturn in demand for global shipping... ]]]]]
Vive Le US markets … and importantly for DJPIN’ers, the DOW.
