A recovering United States is outpacing other major global economies
By Paul Wiseman, AP April 8, 2014, 12:15 am TWN
WASHINGTON--As a brutal winter yields to spring, the U.S. economy is showing renewed strength just as other major economies appear desperate for help.
Europe is clinging to a fragile recovery. Japan just imposed a tax hike that threatens its shaky economic comeback. And China's troubles are rattling the global economy.
The resilience of the U.S. economy, after a growth-chilling winter, was evident in Friday's jobs report from the Labor Department. It said employers added 192,000 jobs in March and 37,000 more in January and February than previously thought.
With the economy making steady gains, the Federal Reserve has been scaling back its bond purchases, which have been intended to lower interest rates to spur growth.
"The U.S. is certainly doing better than Europe or Japan right now," says Nariman Behravesh, chief economist at IHS Global Insight.
Here's a closer look at the rest of the world's big economies:
Just as the Fed reduces its stimulus in the United States, the European Central Bank is considering further steps to help the 18 countries that use the euro currency. The eurozone emerged from a recession — its second in six years — last spring. But the recovery has been faint: The eurozone economy is growing at a glacial 1 percent annual pace.
Mario Draghi, president of the European Central Bank, last week expressed concern about "protracted stagnation" and the eurozone's worrisome 11.9 percent unemployment rate, essentially unchanged from last year's record 12.1 percent.
In addition, inflation is running at dangerously low levels. Consumer prices rose just 0.5 percent in the year that ended in March. The ultimate fear is of deflation, when prices actually start falling. Deflation would hurt growth because tumbling prices cause consumers and businesses to postpone purchases and investments as they wait for still-lower prices.
On Thursday, the ECB kept its main interest rate unchanged at the record low of 0.25 percent. But Draghi said the ECB was ready to use "unconventional measures" to combat super-low inflation. The bank could further lower rates, offer cheap loans to banks or embark on an uncharacteristic Fed-style stimulus.
The eurozone faces another more fundamental problem: a credit crunch. Banks, clogged with bad loans left from the financial crisis, aren't lending to small and mid-sized businesses. And they probably won't until they raise more money to cover potential loan losses.
"Europe is still in convalescence," says Gustavo Reis, global economist at Bank of America Merrill Lynch. "The economy has been growing since the second quarter of last year. But they need to see significant credit growth."
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