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BUSINESSMonday 18 January 2016
Your Money:
Why global woes and sinking stocks don’t mean US recession
PAUL WISEMAN A trader monitors stock prices at the New York Stock Exchange, Friday, Jan. 15, 2016. U.S. stocks of 221,000 jobs a month
BERNARD CONDON plunged again on Friday, completing the worst two-week start to a year ever. during 2015 and 284,000
AP Business Writers a month from October
WASHINGTON (AP) — Last (AP Photo/Mark Lennihan) through December. The
week’s harrowing plunge unemployment rate has
in U.S. stocks — fueled by Zandi, chief economist at that have significant busi- seems true. sunk from 10 percent in
economic fears about Moody’s Analytics. ness there. (Caterpillar “Main Street is better, and 2009 to 5 percent, a level
China and plummeting oil The S&P 500 sank 2.2 per- shares shed 2.7 percent Fri- Wall Street is suffering,” said associated with a healthy
prices — left investors anx- cent Friday and has tum- day.) Jim Paulsen, chief invest- economy.
ious and alarmed. Some bled 8 percent since the “For many of these compa- ment strategist at Wells Improved job security —
wondered if it signaled an year began, deflated by nies, the narrative behind Capital. layoffs have slowed to
approaching recession in expectations of even lower their growth and earnings The broadest gauges of exceptionally low levels
the United States. oil prices ahead and fears prospects is China,” Zandi the economy look funda- — has helped embolden
The answer, most analysts that China’s once-explo- said. “If you throw that nar- mentally sound. GDP likely many Americans to shop.
say, is no. sive economy is slowing rative out, investors get ner- expanded 2.4 percent Consumer spending, which
The American economy more than anyone had vous.” last year, according to JP drives about 70 percent
is expected to prove resil- expected. On Friday, the The disconnect between Morgan Chase. Zandi fore- of U.S. economic activity,
ient and nimble enough to Xinhua news agency re- the actual economy and sees its growth hitting 2.8 rose at an annual rate of
avoid serious damage, at ported that Chinese banks the price of stocks isn’t percent in 2016 — hardly more than 3 percent in the
least anytime soon. For all reduced loans last month new. From the waning days spectacular but decent, spring and summer. Auto
the economy’s challeng- from a year earlier. of the Great Recession into especially at a time when sales hit a record last year.
es, the job market is strong, It was the latest sign that the tepid recovery that fol- many industrialized econo- Not that the U.S. economy
home sales are solid and China’s economy contin- lowed, stocks managed mies are struggling to grow has been left unscathed
cheaper gasoline has al- ues to decelerate — an to gradually rise despite at all. by the weakness abroad.
lowed consumers to spend ominous trend for U.S. com- persistently high unemploy- The job market appears Partly because a stron-
more on cars, restaurants panies, like heavy-equip- ment and tepid economic particularly robust. Employ- ger dollar has made their
and online shopping. ment maker Caterpillar, growth. Now, the opposite ers added an average goods more expensive
The companies that make abroad, U.S. manufactur-
up major stock indexes are ers are suffering.
far more vulnerable than Industrial production fell
the economy itself is to dis- in December for a third
tress abroad: Companies straight month, the gov-
in the Standard & Poor’s ernment said, and orders
500 index derived 48 per- to factories dropped in No-
cent of their revenue from vember for the third time
abroad in 2014, up from 43 in four months. Last year,
percent in 2003. factories added just 30,000
By contrast, exports ac- jobs, the fewest since the
count for only about 13 recession year of 2009.
percent of the nation’s What’s more, energy com-
gross domestic product panies are reeling from
— the broadest gauge of sharply lower oil prices.
economic output. That’s And though falling oil
one of the lowest such prices have helped boost
shares in the world. Exports consumer spirits and en-
to China equal just 1 per- courage spending, they
cent of GDP. also helped slow the over-
“While the U.S. economy’s all economy last year by
exposure to China is rela- causing energy compa-
tively small, the multination- nies to slash investment.
al companies that trade on In addition, the Federal
the stock market are much Reserve has signaled that
more exposed,” said Mark it expects to further boost
interest rates this year after
China-led Asian infrastructure bank opens for business raising them from record
lows in December, and
BEIJING (AP) — A Chinese- million to a special fund to financing for development nance railways, cargo some fear it will move too
led bank intended to fi- prepare less developed but had expressed con- ports and other trade links. fast. Fed hikes were consid-
nance railways and other countries for infrastructure cern looser lending stan- Its launch comes as Beijing ered a trigger for three of
cargo links throughout Asia projects. dards might undercut ef- is trying to extend its trade the past four recessions.
opened for business at a The United States and Ja- forts by existing institutions links with its Asian neigh- Economists don’t en-
ceremony led by President pan are not members of to promote environmental bors. Beijing has pledged tirely understand the links
Xi Jinping. the AIIB, which some see and other safeguards. Chi- to put up most of the among the world’s major
Representatives of 57 as a potential rival to the nese officials have said the bank’s initial $50 billion in economies. The Interna-
member countries of the Western-led World Bank bank will complement ex- capital and says that total tional Monetary Fund has
Asian Infrastructure Invest- and International Mone- isting institutions and prom- will rise to $100 billion. acknowledged surprise
ment Bank attended the tary Fund. ised to adhere to interna- A Chinese official, Jin over just how much Chi-
ceremony Saturday, at Washington has said it tional lending standards. Liqun, has been named na’s slowdown has hurt
which China pledged $50 welcomes the additional The AIIB is intended to fi- the bank’s first president.q other countries in the de-
veloping world.q
