Tags: Samuelson | weakness | overseas | US

WaPo's Samuelson: Economic Weakness Overseas Puts US at Risk

By    |   Monday, 26 January 2015 06:31 PM

Many overseas economies are down in the dumps and that could spell trouble for the U.S. economy too, says Washington Post columnist Robert Samuelson. 

The eurozone economy grew only 0.6 percent annualized in the third quarter, while Japan's economy contracted 1.9 percent annualized, and China's growth slid to 7.4 percent for all of 2014, its slowest rate in 24 years.

U.S. GDP expanded at an impressive average annualized rate of 4.8 percent in the second and third quarters, but the stagnation overseas could spread here, Samuelson writes.

"Think now how this might imperil the U.S. recovery. One channel is weaker exports; other countries buy less of what we make," he says.

"Another is reduced profits from foreign operations of U.S. multinationals. These represent about a third of total U.S. corporate profits. The danger is indirect. Weaker profits might depress stocks, leading to less consumer spending because shareholders feel poorer."

The stronger dollar also can hurt earnings by making U.S. exports more expensive in foreign currency terms and lessening the value of revenue earned overseas by U.S. companies when they convert it to dollars.

Charlie Bilello, research director at money management firm Pension Partners, sees several signs of economic weakness on our own shores.

  • "First, inflation expectations in the U.S. have been falling precipitously over the past year," he writes on his firm's web site.
  • "Second, the yield curve in the U.S. is flattening.
  • "Third, like Europe and Japan, U.S. long duration yields have plummeted over the past year.
  • "Fourth, credit spreads in the U.S. are widening."
  •  Fifth, defensive sectors have led the stock market since the beginning of 2014.
  • "Sixth, if we look past lagging indicators like GDP and focus instead on leading indicators, they are telling a different story."
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Many overseas economies are down in the dumps and that could spell trouble for the U.S. economy too, says Washington Post columnist Robert Samuelson.
Samuelson, weakness, overseas, US
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2015-31-26
Monday, 26 January 2015 06:31 PM
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