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BUSINESSMonday 26 October 2015
Why optimism about the US economy’s strength has dimmed
C. S. RUGABER Americans have been more lasting?” devalued its currency. Fi- there had been the past
AP Economics Writer holding back on spend- As recently as early August, nancial markets plunged couple of years,” said Terry
WASHINGTON (AP) — ing even though lower economists had sketched on fears that China’s once- Babb, president of Apex
Consumers, fueled by job gas prices have put more a bright picture for the rest sizzling growth was shakier Tool & Manufacturing in
growth, cheaper gas and cash in their pockets. Em- of the year and, as a re- than anyone had thought Evansville, Indiana.
higher home values, would ployers have slowed hiring sult, thought the Federal and would slow econo- Falling demand for U.S.
drive the U.S. economy and held down pay. Home Reserve would be confi- mies elsewhere. Last week, goods hurts even compa-
China said its economy’s nies that don’t themselves
Joe Warner fills up his tank at a gas station in Atlanta. A few months ago, the hope was that growth slid to 6.9 percent in export products. CSX Corp.,
consumers, fueled by job growth, cheaper gas and higher home values, would drive the U.S. the July-September quar- for example, said its reve-
economy through a global slump. Now, doubts are growing that the United States can withstand ter from a year earlier, the nue from transporting coal
economic pressures from overseas. slowest pace in more than fell 19 percent in the third
six years. quarter from a year earlier
(AP Photo/David Goldman) As China’s appetite for oil, in part because of reduced
copper, iron ore and other coal exports.
through a global slump. sales have flattened. And dent enough to raise inter- commodities has fallen, The higher-valued dollar
That was the widespread the U.S. economy has been est rates from record lows so have prices for those is squeezing U.S. corpora-
hope just a few months hobbled by a stronger dol- in September. The Fed goods. One consequence tions’ sales in another way,
ago. Now, doubts are lar, which makes U.S. goods chose not to. And many is that U.S. energy compa- too: Their revenue in for-
growing that the United costlier overseas and is de- economists and investors nies, squeezed by lower oil eign currencies is worth less
States can withstand eco- pressing corporate profits. have pushed back their prices, are buying fewer once it’s converted back
nomic pressures flowing “There’s no question that forecast for a Fed rate hike factory goods. At Ahaus to dollars. Wal-Mart, for ex-
from overseas. Economies the economy is losing mo- into next year. The U-turn Tool & Engineering in Rich- ample, says it expects flat
in China, Canada, Brazil mentum,” said Mark Vitner, in sentiment happened mond, Indiana, orders for sales this year, partly be-
and Europe are struggling. an economist at Wells Far- fast. It occurred soon after components it sells to drill- cause of such currency ef-
Canada, the largest U.S. go. “The question is wheth- China made a clumsy at- ing equipment makers fects. Johnson & Johnson
trading partner, is in reces- er it is temporary ... or is it tempt last summer to prop have dropped. and Monsanto have also
sion. something that will prove up its stock prices and then Gas drillers “are cutting their said currency exchange
costs, which means they’re rates are depressing rev-
slowing down on buying enue. At the same time,
new components,” said U.S. consumers appear to
Kevin Ahaus, the company be pulling back. Sales at
president. “We’re not see- retail stores and restaurants
ing much business there.” dipped in September after
U.S. factories cut produc- a flat reading in August.
tion for a second straight Though Americans are
month in September. Man- snapping up cars at a solid
ufacturers are being hurt pace, retail sales excluding
by a declining appetite for autos have fallen for two
their goods overseas and months. Scott Brown, chief
by cheaper foreign-made economist at Raymond
products. U.S. exports are James, said “middle and
down this year compared lower-end consumers are
with 2014, the first year- still struggling a lot.”
over-year decline since the With apartment rents ris-
Great Recession officially ing rapidly and pay growth
ended in 2009. anemic, “it’s still tough for
“We haven’t seen near as many households to make
much interest overseas as ends meet,” he said.q
China move shows global reliance on low rates to lift growth
JOE McDONALD major central banks remain ber. The Chinese economic by consumer spending. slowing, raising fears of job
PAUL WISEMAN committed to unusually slowdown has unnerved Recent economic figures losses and unrest.
AP Business Writers low rates to try to spur eco- investors around the world, reflect the transition. In Sep- The government is step-
BEIJING (AP) — China’s nomic growth. This week, hurt countries that had tember, growth in factory ping in to try to keep official
sixth interest-rate cut in a the head of the European prospered by supplying output slowed to 5.7 per- measures of growth close
year shows how hard it is to Central Bank made clear China with raw materials cent from August’s 6.1 per- to 7 percent.
keep the world’s second- that the ECB is weighing fur- and weighed on global cent. The Chinese central bank
biggest economy growing ther steps to ease borrow- growth. At the same time, retail said it will reduce the
vigorously while attempting ing rates. China’s deceleration is sales growth rose to 10.9 benchmark rate on a one-
one of history’s most auda- And next week, the Federal partly deliberate. Beijing percent from July’s 10.5 year loan by 0.25 percent-
cious economic transfor- Reserve is widely expected wants to move the coun- percent. age point to 4.35 percent,
mations. to hold its key rate near try away from an over- E-commerce spending effective Saturday, and cut
The country’s central bank zero, where it’s remained reliance on exports and surged 36 percent in the one-year deposit rates by
this weekend announced for seven years. often-wasteful investment third quarter over a year the same margin to 1.5 per-
cuts in benchmark interest China’s latest rate cut in housing, factories and earlier. cent.
rates on loans and depos- came four days after the infrastructure projects such But the growth in consumer The bank also freed up
its. government reported that as roads and high-speed spending and services isn’t more money for lending
The moves by the People’s growth had slowed to a trains. Instead, China is entirely offsetting the de- by reducing the level of re-
Bank of China are the lat- six-year low of 6.9 percent seeking slower but more cline in older industries. As serves Chinese banks are
est sign that the world’s from July through Septem- sustainable growth driven a result, overall growth is required to hold.q
