Global Outlook Just as Britain’s GDP numbers this week were unworthy of the cheer they received from the Government, so the United States’ economic growth also remains dismally poor.
Yes, they both featured growth rather than contraction, but the growth is tiny, and our economies remain utterly sickly.
Perhaps the most worrying thing about the US numbers is the way they highlight in stark terms how utterly reliant the world’s biggest economy remains on public sector spending.
Faced with huge, and justified, concerns about the size of America’s unprecedented debt mountain, President Obama has been unable to convince Washington of the need to keep turning on the spending taps to keep the domestic economy going.
Instead, taxes have risen and government spending has been cut. Now, as A follows B, consumer spending is starting to struggle.
Like Britain but more so, the consumer is the US economy. The squeeze they’re now feeling as Mr Obama takes the austerity pathway is hurting. And it’s happened quickly.
Retail sales in the US fell 0.4 per cent in March, employment levels barely rose at all and, as Markit economist Chris Williamson points out, American families have been having to dip into their savings to a greater extent than at any time since late 2007.
This, let us remember, is just a month into the $85.4bn (£55.5bn) of public spending cuts being brought in this year under the so-called sequestration emergency measures.
Federal and state spending has been falling even before sequestration, of course. One of the main reasons we got a positive number at all in yesterday’s GDP figure was because the previous quarter’s output was hobbled by widespread defence spending cuts.
Indeed, federal expenditure fell by an annualised 8.4 per cent during January, February and March. And that spending will decline exponentially in the coming quarters.
And don’t expect to find much joy outside of the consumer side of the American economic scene. America’s factories are also cooling as exports suffer.
With tax rises and spending cuts wired into his policy choices, Mr Obama has little room to do much. He must leave it instead to the unelected Ben Bernanke to keep prescribing his economic happy pills. That’s $85bn a month of stimulus cash.
Five years on from the crisis, and still no end in sight.Reuse content