by Amal Mohy
With a strong dollar and lower demand for goods, many world economies are struggling with contraction of output and slump of exports. However, the picture was much brighter for the US economy and Canada.
Unlike other world economies, growth rates have improved in the US. Growth was up due to hiking consumer spending and collapsing fuel prices, according to the Commerce Department. Consumer spending–which greatly affects the US economy–increased at a rate of 2.9 per cent in the second quarter, from 1.8 per cent in the first quarter of this year. With the US economy offering more than 200,000 vacancies a month, unemployment rates have shrunk to 5.3 per cent. “The improving job market, alongside the boon to households from low inflation and falling oil prices, has been key to the economy’s ability to sustain strong growth,” said Chris Williamson, chief economist at research firm Markit.
However, the annualised growth for the second three months is absolutely weak compared to expected figures by economists. “The pace for growth remains extremely weak by past recovery standards, but with potential growth weaker as well, it appears to be more than sufficient to keep the unemployment rate coming down,” Jim O’Sullivan, chief US economist at High Frequency Economics, said.
Canada seems to benefit from the strong dollar and growth of the US economy after a slump in Canada’s oil sector. Exports to the US hiked by 7.1 per cent in June, Canada’s total exports, however, surged by 6.3 per cent to reach $44.6 billion in June marking the highest monthly increase in exports since December 2006; while imports dropped 0.6 per cent to $45.1 billion. Canada’s GDP also decreased in the first five months of the year.
On the other hand, China’s exports, a key driver for China’s economy, have plunged in July particularly after the declining euro and lower flat in the Euro zone. Overseas shipments dropped 8.3 per cent from a year earlier in dollar terms, the customs administration said. China’s shipments to the European Union plummeted 2.5 per cent in the first seven months of 2015 from a year earlier, while exports to Japan fell 10.5 per cent. Yet, exports to the US increased by 9.3 per cent.
Mostly, China’s growth is hindered by low domestic investment and contracted global demand. In order to finance construction, for instance, the Chinese government has adopted a number of measures including special bond sales.
Although the UK is among the big beneficiaries of the cheap oil prices, the giant economy is still hammered by both a strong pound that hit external demand for its goods and lower demand from the European Union in general. Exports of goods dropped slightly by £300m to £24.9bn in June as a result of a weaker demand in the European Union. Meanwhile, imports of goods increased by £500m to £34.1bn reflecting the huge amounts of oil that entered the UK.
Consequently, the UK trade deficit on both goods and services, for the second quarter of the year, reached £4.9bn, the lowest since the second quarter of 2011 and much more below the £7.5bn deficit in the first quarter of 2015, according to the Office for National Statistics.
Germany’s industrial output similarly dropped unexpectedly by 1.4 per cent despite low oil prices and the declining euro. According to the Federal Statistical Office, Germany’s trade surplus hit 22 billion euros ($24 billion) in June. Exports slumped one per cent to 101.1 billion euros from a month earlier, while imports dropped by 0.5 per cent to 79.1 billion euros. However, the figures were higher in the first half of the year– German gross exports hit nearly 600 billion euros, up seven per cent from the first half of the previous year.
Meanwhile, Japan’s economy shrank in the second quarter of the year, at an annualised rate of 1.9 per cent compared to an increase by 3.9 per cent in the first quarter of the year. This was due to Japanese falling exports and floundering consumer spending. However, economists expect growth to rebound in the current quarter and that exports will rise. Capital spending is estimated to fall by 0.3 per cent, after it was up by 2.7 per cent in the previous quarter, marking the first fall in 2015.
Brazil, the world’s seventh largest economy, is also struggling with its economy which is set to shrink by 1.5 per cent this year, according to the International Monetary Fund. Inflation in Brazil has reached a 12-year high of 9.56 per cent, official figures have indicated. Lower demand for Brazil’s goods, particularly from the plummeting Chinese economy has caused such inflation. To cut the country’s deficit, the Brazilian government is trying to force measures seeking spending cuts and tax rises.
