What will power the U.S. economy is likely low oil prices. Just like low oil prices powered the U.S. economy from 1945 until 1973 during the Arab Oil Embargo when Opec started out throwing it's weight around then. Since 1973 when oil quadrupled or more in price the U.S. economy has been on again and off again depending how much we have had to pay for oil. So, low oil prices always make the U.S. economy take off and fly (until they go up again).
Why the US will power the world economy in 2015
WASHINGTON (AP) — The United States is back, and ready to drive global growth in 2015.
Associated Press
Tue, Dec 30, 2014, 2:52AM EST - US Markets open in 6 hrs and 38 mins
Why the US will power the world economy in 2015
By CHRISTOPHER S. RUGABER
14 hours ago
After long
struggling to claw its way out of the Great Recession, the world's
biggest economy is on an extended win streak that is edging it closer to
full health. But the new year doesn't look quite so bright in other
major countries.
China is
slowing as it transitions from investment to consumption. Japan has slid
into a recession. Russia appears headed for one. Europe is barely
growing.
And the U.S.?
Six
years after its financial system nearly sank and nearly that long since
the recession ended, the United States is expected to grow in 2015 at
its fastest pace in a decade. Its expansion from July through September —
a 5 percent annual rate — was the swiftest for any quarter since 2003.
That
pace will likely ease a bit. Still, the economy is expected to expand
3.1 percent next year, according to a survey by the National Association
for Business Economics. It would be the first year of 3 percent growth
since 2005.
The acceleration of U.S. growth is a key reason the
global economy is also expected to grow faster, at about 3 percent, up
from 2.5 percent in 2014, according to economists at JPMorgan Chase and
IHS Global Insight.CHEERING CHEAPER OIL
Plunging
oil prices are a big reason for the optimism. Prices have been cut
roughly in half since summer. In some areas of the country, gasoline
prices have slipped below $2 a gallon. The drop, along with more
fuel-efficient cars, will save the average U.S. household $550 on gas
next year, according to the U.S. Energy Information Administration. That
means consumers have more to spend on items like cars, furniture and
appliances.
What's more, Americans' finances are in firmer shape.
Job growth is accelerating. Businesses are investing in buildings and
software, and home building is expected to pick up.
Lower
oil prices will also help Europe and Japan, and the global economy
should expand faster than it did this year, economists say. But the
divergence between the United States and most of the rest of the world
is striking and carries some risks. Big exporters, from China to Germany
to Japan, will depend heavily on a recovering U.S. to boost their
economies.
A pickup in global
growth "is highly dependent on the assumption that the U.S. economy
continues to improve," said Douglas Porter, chief economist at BMO
Capital Markets. "If that doesn't play out, there's not much left for
the global economy to fall back on.
SWIRLING GLOBAL HEADWINDS
Even if the U.S. economy does strengthen further, the rest of
the world could struggle. For one thing, faster growth will likely lead
the Federal Reserve to raise interest rates in 2015, which could draw
more investment from overseas. The inflow of capital would raise the
dollar's value and potentially cause destabilizing drops in other
currencies. Governments and businesses overseas that borrowed in dollars
would find it harder to repay those debts.
The hot economies of the last decade — the emerging markets of Brazil, Russia, India and China collectively known as the "BRICs" — will likely grow in 2015 at their slowest pace in six years, according to Oxford Economics, a forecasting firm. Falling oil and commodity prices have smacked Brazil and Russia particularly hard.
China may expand 6.5 percent or more. Yet that's a far cry from the nearly double-digit growth it enjoyed for decades. Europe and Japan will be lucky to expand even 1 percent.
The gap between the U.S. and the rest of the world reflects a fundamental trait of the U.S. economy: It's more insulated from the rest of the world's ups and downs than other major economies are. Exports account for just 14 percent of U.S. output, the smallest share among the 34 mostly rich members of the Organization for Economic Cooperation and Development.
One U.S. company largely protected from overseas trends is Globe Specialty Metals, a Miami-based producer of silicon metals that draws 90 percent of its revenue from North America. Its silicon is added to aluminum and rubber parts used in cars, and robust auto sales have boosted the company's revenue.
CEO Jeff Bradley says he's optimistic about 2015. As gas prices have sunk, Americans have been buying more SUVs and pickups, which use more aluminum. Demand for solar power panels is also lifting sales.
"Things are lining up for next year to be one of the best years in the history of our company," Bradley said.
POWERING US CONSUMERS
In the United States, consumers are the main drivers of growth. And fortunes are looking up for more households. Employers are on track to add the most jobs in 15 years in 2014. As a percentage of income, Americans' debt has dropped to 2002 levels.
In
some ways, the U.S. economy actually benefits from slower growth
abroad. Investors in search of safety have plowed money into Treasurys,
thereby helping hold down inflation and U.S loan rates, including for
mortgages. Lower rates, in turn, could fuel more home sales and
construction next year.
Stan
Humphries, chief economist at Zillow, thinks Americans ages 25 to 34,
stung by higher rents, will buy homes in greater numbers by the end of
2015. Mortgage giants Freddie Mac and Fannie Mae have relaxed their down
payment requirements, which were a strain for younger would-be buyers.
Humphries also thinks developers will build more lower-priced homes that
millennials can afford.
Some signs of hope overseas have emerged.
Falling oil prices should benefit people in Europe, Japan and China,
all of which import oil. And analysts expect the European Central Bank
to ramp up its stimulus efforts, possibly by buying government bonds.
That step would inject more cash into the economy to boost lending and
keep rates low.
DOUBTING JAPAN
The
global economy's biggest wild card next year might be Japan. It slid
into recession last quarter after a sales tax hike hammered consumer
spending. Prime Minister Shinzo Abe has delayed a second increase to
2017.
Japan's central bank is
buying government bonds and other financial assets in a bid to boost
inflation and stimulate growth. Yet so far, wages haven't risen in line
with prices, thereby threatening consumer spending.
Masaaki Ogawa,
a third-generation vegetable shop owner on Tokyo's downtown Sugamo
shopping street, is among many who feel frustrated."The older people have money, but they don't want to spend it," Ogawa said. "The younger people want to spend, but they don't have any money."
___
AP
Business Writers Elaine Kurtenbach in Tokyo, David McHugh in Frankfurt
and Joe McDonald in Beijing contributed to this report.
___
Contact Chris Rugaber at http://Twitter.com/ChrisRugaber
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