Asia’s Slowdown Will Affect America’s Growth

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WASHINGTON – Can America count on buoyant global demand to drive more US exports, and therefore more sustained growth at home? Not really. Here is an item from the WSJ, (April 22, 2015): “Growth across Asia is slowing despite rate cuts as consumers and businesses focus on repaying heavy debts”.

Yes, you got it. Led by China, Asia until yesterday was touted as the world’s economy locomotive. But it seems that the Asians are also maxed out: too much debt impedes more investments and more consumption.

Indeed, another related headline is about Ford motor company trying to keep its market share of the once exploding Chinese automotive market while facing the headwinds of slower demand for new cars. Sure enough, the Chinese car market is still growing. But it has lost altitude. Forget about 16% rates of growth. Therefore Ford and GM are facing fewer sales in China.

Tough times for America

What does all this mean for America? It means that our unimpressive recovery (2.4%) may soon come to an end. US domestic demand is not growing, in part due to high levels of consumer debt that inhibit more purchases, and in part due to income stagnation.

If we add to this uninspiring scenario an Asian economic slowdown, it is really hard to see where the new growth will be coming from.

Tough times ahead.

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