The US economy seems to be improving… (does it?)

As we’ve been deeply involved in our own problems lately, we are failing to look around and see what’s going on in the world. As I always say: Turkey will not achieve a proper improvement on its own while the whole world is going downhill. Turkish economy is growing, or should I say Turkish economy was growing, using others’ money.

That’s why it’s important to closely observe the US economy that generates 25% of total global GDP.

Last week, I read Trump’s latest statement on the US economy. Given the upcoming elections, he was talking about the economy in a quite confident manner. The fact that personal spending rate turned out to be higher than expected had clearly encouraged Trump to speak with certainty about Americans’ economic future.

As a matter of fact, any increase in personal spending is an indicator of people’s confidence in the economy. It is a very well-known fact that American people tend to lower consumption whenever they feel anxious about the future. However, another interesting thing is that personal income didn’t increased as expected despite the fact that personal spending rate turned out to be higher than expected.

So, it shows that the US citizens started to spend without achieving any rise in their income. Although the Fed has been gradually hiking rates, which have been kept at lower rates for a very long time, the current interest rate still seems to be pretty low. I think the US is making use of lower rates before falling into a liquidity trap.

We must admit that the Fed’s previous measures have worked quite well in US economic improvement. The rate hike decision has also given the message of “The economy is doing well”. Consumer confidence and eagerness remained intact as inflation was showing a moderate trend. In the meantime, those who could save some money were able to put it in savings accounts with positive real interest rates. Despite Trump’s harsh messages and major changes in Fed management, they could able to keep a strong stance regarding their monetary policy. Let’s me also remind you that the Fed decided to keep the rates intact at their last meeting.

“The way things are going, Trump will likely be re-elected…”

All these recent developments clearly indicate that the US has recovered from the aftershocks of 2008-2009 financial crises. However, inflation and price indexes are improving way slower than expected, which could also be the result of the fact that global commodity and agricultural prices have reached a plateau. As there haven’t been any serious movements in demand, prices are showing a moderate trend lately.

Although all the things I mentioned above are clear proof of an improvement in American economy, I’d like to point out the possibility that the US may fall behind China in terms of civil technologies manufacturing. Lately, I’ve been observing that the US seems to be more focused on military technology while becoming more dominant in software technology and services for the civilians.

I don’t think that the US will choose to revive conventional industry sectors even though Trumps continues to claim that he will make conventional sectors great again. But surely he will not give up this rhetoric until he wins the re-election. He might even use US-China trade talks as a valuable propaganda asset for his presidential campaign.

Search