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Consumerism and the Economy

            "When the US sneezes, the rest of the world catches a cold," I used to hear on a news show as a kid. The conclusion in the opposite sense is that if the US speeds up, its movement will boost growth around the globe. This week, we have found that the US economy is growing at 3.9% in annualized terms. Let's note the significant connotations deriving from this growth. Firstly, US consumers represent nearly a fifth of the world's GDP. Thus, if Americans do not buy pants because they have been snowed in by the snowstorms from the first quarter of 2014, this is bad news for the Chinese pants manufacturer, and also for the German machinery maker that exports to China the necessary parts to manufacture those pants. The strength of the US labor market, together with 2% annual growth in salaries, drives consumption, which is growing at around 4%, or 2% in real terms. Given that the US is the number one importer, the reactivation of global trade is a direct result of the US' economic acceleration. Thereby, the world trade organization estimates that global trade will double in growth from 2014's 2.5% (affected by the US' unusual first quarter) to 5% in 2015. This is good news for exporters, and also for the global economy.
             Secondly, US investments are growing soundly after many years of sluggishness. This movement is a direct result of the underinvestment experienced in the last few years, the strong demand (consumption, which encourages investments to produce more, as there is a perception that the extra production will sell), and the access to financing. Investments are correlated with hiring; it is thus inferred that more jobs will mean more consumption. This is a virtuous circle that will again ultimately have a positive result on the rest of the world, given the imports related to investment and the ensuing consumption.
             Thirdly, the Fed's monetary policy, albeit designed mainly based on the US' goals (inflation control and job creation), has greatly benefited a significant part of the world-particularly Europe, where the crisis has been much deeper than in the US.

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