Many prophesies of doom and gloom emerged for the U.S. economy after Wednesday's news that GDP grew only 0.2 percent in the first quarter.
But fear not, says Ambrose Evans-Pritchard, international business editor of The Daily Telegraph
. It's not that he denies the magnitude of the problem.
"The U.S. economy has suddenly stalled. A blizzard of shockingly weak figures raise the awful possibility that America's six-year growth cycle since the Great Recession has already rolled over, with unsettling implications for the world," he writes.
"Worse yet, this apparent exhaustion is taking hold even before the Federal Reserve has begun to raise interest rates or to drain any of its $3.7 trillion of quantitative easing and balance-sheet expansion."
Referring to former Treasury Secretary Larry Summers' warning of secular stagnation, Evans-Pritchard, says, "We should not ignore his warnings lightly. Yet for once I am an optimist, clinging to the belief that the U.S. will recover from the strange air pocket of early 2015."
And what fuels his optimism?
- "Fiscal headwinds have abated.
- "Money supply is igniting.
- "Commercial and industrial loans are growing even faster.
- "The New York Fed says the post-Lehman purge of household debt has 'largely run its course.'
- "The overhang of unsold houses on the market has essentially been cleared, and hot spots are booming.
- "The ratio of job openings to applicants is now higher than it was at the top of the last boom in 2007 by a substantial margin," he writes.
"This is not the picture of a country on the cusp of recession."
Looking at the longer term, Byron Wien, vice chairman of Blackstone Advisory Partners, says slowing population growth will put a damper on GDP growth and profits during the next 50 years, says
A new study by the McKinsey Global Institute estimates that population growth will drop to 0.3 percent a year in the next half-century, after growing six-fold during the last 50 years.
"If productivity continues to contribute 1.8 percent, overall [economic] growth will decline to 2.1 percent, a rate 40 percent less than during the past half-century," Wien writes in an article for Barron's
"The implications of this slowdown on global changes in the standard of living and investment opportunities could be enormous."
In the United States, productivity growth shrank an annualized 1.8 percent in the fourth quarter, and the economy grew 2.4 percent last year.
As for investors, "this means that profit margins are likely to be under pressure if the boost from productivity improvements diminishes," Wien says.
"It also means that revenue increases may be modest as the population grows more slowly. Because these factors will have a negative impact on earnings growth, companies will focus more on financial engineering . . . to increase earnings."
U.S. companies are on track to execute more than $1 trillion of stock buybacks and dividend payouts this year.
Innovation will be crucial, "and investors will seek out the industries and companies that can provide it," Wien explains.
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