The American economy is still struggling. This is because of the impact of global economic slowdown. While the United States has seen job growth recently including cheaper gas and a rise in home values, there is doubt that the economy will pull through. The economic pressures abroad affect the import export levels of the country. Other countries such as Canada, America’s largest trading partner poses a negative impact to the country’s growth. Other trade partners have also struggling economies such as China and the European Union.
In recent months in spite of lower gas prices, consumers have not been spending. Employers have also decreased hiring rates with home sales flattening. Furthermore, with a strong dollar American products and services are more expensive overseas decreasing profits for multinational companies. The indicators show that the economy is losing momentum as there are doubtful outlooks for the future.
While everything seemed bright last August, the Federal Reserve chose not raise interest rates as it is forecasted the rate hike will be in 2016. The once promising outlook of the United States economy is due to China’s currency devaluation. Investors were afraid that China’s economy would slow down affecting other countries as well. In fact, it has slowed down to 6.9% which is the lowest pace in the country’s six year history. China has also decreased its purchase for oil and other commodities resulting in a decrease of prices.
This has resulted in most American companies buying fewer factory goods. United States energy companies have applied cost cutting methods since their major customer, China has not been buying. More importantly, United States’ manufacturing sector has declined its production. Their products cannot compete overseas with a strong dollar. Moreover, the same products have cheaper alternatives produced by other countries. In this way, United States exports have declined in comparison to 2014. This is the first decline since the Great Recession ended in 2009.
To put it simply, the demand for American goods are low. It even continues to fall within domestic markets as they cannot compete with price. American made goods turn out to be more expensive. The local market is also experiencing a declining in demand for coal including the fact that coal exports have also decreased. In this way, the strong US dollar is negatively affecting other companies whose earnings are converted back to dollars. Multinational corporations that earn abroad are seeing less sales profits due to the currency exchange. Companies like Wal-Mart and Johnson & Johnson expect to reap low sales.
Retail sales in the United States have also been slowing down. Consumer spending is low even in restaurants. The only industries to have sales are automobiles but still they have posted a two month sales slowdown. Significantly, the low to middle class consumer market in the United States are still having a hard time as rent prices have gone up with pay levels not increasing. In this manner, middle to low income households is unable to have the extra cash to push macro retail sales.
As consumers are not spending, this has affected sales of even electronic goods in comparison to higher sales in previous years. This has brought a dilemma for companies who have large stocks of unsold goods. They expected that consumer demand would be high but the adverse occurred.
This has led businesses to stop making new orders wherein American economic growth is expected to be lower in the coming quarter. Employee hiring has also been low compared to the average of 245,000, which was posted in the last twelve months. Today hiring is around a dismal 130,000 to 140,000. As such, this poses a problem for businesses with less job hiring and income growth. It is necessary for the consumer market to spend more in order to jump start the economy.