America’s Role as Consumer of Last Resort Goes Missing – Bloomberg 12-01-13

Salient to Investors:

The smallest US current-account deficit since 1999 shows the US is a lesser supporter of global growth than in the past. Exploration and production are adding to growth, reducing spending on imported energy, cheaper fuel and raw materials are boosting manufacturing, making the US more of a competitor to emerging-markets nations and less a reliable consumer of their goods.

Manoj Pradhan at Morgan Stanley said global growth is slowly becoming more of a zero-sum game and US growth is not reverting to the pre-crisis model, which created lift for everyone else.

Gustavo Reis at Bank of America Merrill Lynch said a 1 percent pickup in US growth is boosting expansion elsewhere by closer to 0.3 percent versus 0.4 percent previously. Reis said consumption will climb 2.2 percent in 2014, up from 1.8 percent in 2013, but property investment will rise 18 percent.

The median economist predicts the US will grow 2.6 percent in 2014 and 3 percent in 2015 versus 1.7 percent in 2013, and expects tapering to begin in March 2014.

The IMF predicted in October that the developing economies would grow by 4.5 percent in 2013, the slowest pace since 2009 and well below their average for the past decade.

Raghuram Rajan at Reserve Bank of India in October said everyone is worried about a global storm, and investors typically do not pay enough specific attention to individual economies during periods of stress.

Michael Shaoul at Marketfield Asset Mgmt expects some emerging markets will see further capital outflows in coming months as investors separate the good countries from bad. Shaoul says the bear market in emerging markets has not yet bottomed, especially in Brazil and India.

The Institute of International Finance predicts private capital flows to emerging markets will decline to $1 trillion in 2014 from $1.2 trillion in 2012.

The IMF said Americans accounted for 22 percent of worldwide GDP in 2013, versus 31 percent in 2000, while China tripled its share to 12 percent.

An average of 7.3 million barrels of oil a day were produced in the US during the first 8 months of 2013 versus 5 million barrels a day in 2008, the biggest multiyear rise since the country’s oil production peaked in 1970.

HIS said the US may improve its trade balance by more than $164 billion a year by 2020 because of the declining need for energy imports and the growing competitive edge for US-based energy-intensive industries – equal to a third of today’s current-account gap.

Christof Ruehl at BP said US energy and manufacturing trends bring significant improvement in the US current account and will go a long way in rebalancing the global economy.

David Woo at Bank of America says improvements in fiscal and trade imbalances make the US the most-improved industrial economy of 2013.

Citigroup predicts a reversal of the 50-yr decline in manufacturing’s share of GDP, helped by more-competitive worker wages. Boston Consulting Group said 54% of manufacturers with sales topping $1 billion are planning to bring back factory lines from China or will consider it, versus 37 percent in February 2012.

Mohamed El-Erian at Pimco says if the US can fire itself up, having repaired bank balance sheets and begun to tap corporate cash piles, it would be a net positive for the world.

Andrew Kenningham at Capital Economics said gains in US equities and sustained economic growth improve financial conditions globally, because the US is still the major player.

Stephen L. Jen and Fatih Yilmaz at SLJ Macro Partners said the US provided the thrust for worldwide growth in every recovery during the past 40 years – 48 percent of the global economy’s expansion in 1999 after Asia’s financial crisis – and will lead the way again because of US innovation and tech prowess.

Read the full article at http://www.bloomberg.com/news/2013-12-01/consumer-of-last-resort-missing-as-u-s-leaves-the-world-behind.html

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