The Economist: US Economy Reinventing Itself, Becoming Global ‘Comeback Kid’Friday, 13 Jul 2012 10:29 AM The U.S. economy is reinventing itself, fast becoming the "Comeback Kid" while the world's other major economies remains mired in uncertainty, The Economist reports. During the financial implosion of 2008, U.S. policymakers made tough and quick decisions to prop up the banking sector, while the country's housing sector, which threw the country into the worst downturn since the Great Depression, is poised to make gains. "America’s houses are now among the world’s most undervalued: 19 percent below fair value, according to our house-price index. And because the Treasury and other regulators, unlike their eurozone counterparts, chose to confront the rot in their financial system quickly, American banks have had to write off debts and raise equity faster than their peers. (Citigroup alone has flushed through some $143 billion of loan losses; no eurozone bank has set aside more than $30 billion.)" U.S. consumers have paid down their debts as well, while a weaker dollar is boosting the country's exports and narrowing the country's trade deficit to 4 percent of gross domestic product today from 6 percent in 2006. Exports themselves are changing in nature as well, as while Boeing, Microsoft and Hollywood film studios continue to send goods and services abroad, new services are shipping out as well. "There is a boom, too, in high-value services (architecture, engineering and finance) and a growing 'app economy', nurtured by Facebook, Apple and Google, which employs more than 300,000 people; its games, virtual merchandise and so on sell effortlessly across borders," the magazine reports. "Constrained by weakness at home and in Europe, even small companies are seeking a toehold in emerging markets. American manufacturers are recapturing some markets once lost to imports, and pioneering new processes such as 3D printing." Long a voracious importer of energy, the U.S. is set to export natural gas while importing less oil these days. The U.S. economy continues to battle headwinds, especially due to weak job demand, though the labor market may be showing some signs of improvement. Weekly initial claims for state unemployment benefits dropped 26,000 to a seasonally adjusted 350,000, according to the Labor Department's latest data. Claims are at their lowest levels since March of 2008, which experts see as a good start. "It's great, it's welcome news. It's not a game changer," says Peter Kenny, Managing Director at Knight Capital In Jersey City, New Jersey, according to Reuters. "We are still at 350,000, which is the least since March of 2008 but it is not effectively changing anything — the conversation, the approach, the market's outlook — nothing. Any kind of lift we get from this welcome and good news will be short-lived." © Moneynews. All rights reserved. To subscribe or visit go to: http://www.moneynews.com |