During the past couple of months it has become clear how a number of European countries suffer from severe dept issues. This has created a worry that Europe will drag the US back into recession less than a year after the country started to recover. However there are a number of parameters indicating that the US will steer clear of a new crisis and experience continued growth.
Europe is going through a period characterized by great financial instability, which is caused by the debt issues, not only in Greece but in a number of European countries. The worries about Europe have taken the attention away from the positive development that has taken place in the US. Attention has instead been on whether the US would experience a so called double dip, meaning another recession following a short period of prosperity.
American Prosperity
For three fiscal quarters in a row the US has experienced a positive growth and it is expected to continue with growth rates of 3,2 - 3,7 percent in 2010 and 3,4 – 4,5 percent in 2011. Unemployment is still at 9, 7 percent, which is an exceptionally high number, which is caused by the 8 million jobs that were lost during the financial crisis.
“In spite of the very high unemployment rate it is noteworthy that this number has been decreasing since October 2009 where it hit an all time high of 10,1 percent. Furthermore it is important to note that consumer confidence increases and that consumer spending has increased by 3,4 percent compared to a year ago. As such, the US is experiences growth on a number of parameters, though it is with a fairly slow pace” says Mikael Hougs, Manager of DIs office in New York.
Modest Effect from Europe
There is without doubt awareness in the US about the European situation and the risk it is poses for the US, creating worries of a double-dip. However, Ben Bernanke, the Chairman of the US Federal Reserve, predicts that the European debt crisis will only have a modest effect on the American economy, and with this statement Bernanke conjured away some of the worries. The prediction is based on the grounds that the economic growth in the US no longer is caused by political support and intervention, but instead by increased demand from the American consumers.
A Stronger Dollar Makes Export Attractive
The European crisis has made its mark on the US in one way: the value of the Euro has decreased significantly towards the Dollar. Or seen from an American perspective, the value of the dollars has increased with almost 20 percent compared to the euro since January 1st this year.
“The combination of increased demand among the American consumers and a stronger Dollar makes it more attractive for Danish companies to export to the US at this current time” says Mikael Hougs.
18 June 2010