The global economy needs the US glutton to crawl back to the table
The green shoots of recovery are being liberally fertilised by Gordon Brown, Barack Obama, China and a bunch of stimulating central bankers. But their growth-promoting seeds are landing on exhausted soil.
The traditional global big spenders - US and UK consumers - have lost the cash machine of equity release that was funded by ever-rising house prices. Germany and Japan - traditionally major producing countries - are suffering steep falls in sales and output. China may still be growing, but whether it offers a lifeline for the west is in doubt.
The big global problem is who will buy? Brown and Obama’s spend-out-of-trouble policy meets its first problems close to home. The mighty American consumer, source of 70pc of GDP in the world’s biggest economy, is all consumed. The dollar is weak, magnifying the impact of US consumers’ reduced spending power on the rest of the world. US goods imports rose by 43pc, or $635bn, in the four years to 2008. Now they’re falling. Excluding oil, they dropped by 23pc year-on-year in the first quarter. The world is struggling with the loss of the American consumer glutton. But normal gluttony won’t be easily restored. US and UK growth was previously propelled by house-price gains. The Bank of England produces the best statistics on the size and impact of this phenomenon. UK consumers turned £237bn of their mortgage lending into consumer spending in 2003 to 2007. That big number, an average of £47bn per year, was equivalent to 5.6pc of consumers’ post-tax income. In the US, mortgage refinancing is believed to have given a similar-sized boost to consumer spending.
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