U.S. economy chugging, as rivals face recession

Third-quarter growth of 2.7% outpaces peers

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They point out that the U.S. economy has performed better than many others in part because it has avoided imposing the kinds of tax increases and spending cuts needed to control its budget deficits. Such austerity measures are being imposed in Europe and are a major reason for the recession there this year.

But Federal Reserve Chairman Ben S. Bernanke was one of many authorities who are increasingly upbeat about the U.S. economy, noting in a recent speech that it is finally shedding the weight of the big debt hangover brought about by the Great Recession and housing crisis.

He said the economy should perform well next year, if Congress can avoid tipping it back into recession by failing to avert a fall off the fiscal cliff. White House and congressional leaders have been working to achieve a compromise budget deal, though they remain far apart on its components.

Economy could ‘boom’

“Bernanke held out the prospect that if lawmakers can deliver fiscal clarity — a plan for long-term deficit reduction without harming the recovery — the new year could be a very good one for the U.S. economy,” said Nigel Gault, chief U.S. economist at IHS Global Insight.

“We agree with Bernanke that the fundamentals for stronger growth are falling into place,” he said, although many analysts remain skeptical that Washington will avoid a major economy-shaking showdown in coming weeks.

By comparison, the news overseas has been bleak. Britain and the eurozone have been in recession since last year, though Britain’s economy shows signs of possibly emerging from its downturn. With exports to Europe and China falling at double-digit rates, Japan’s economy staged a stunning reversal in the past quarter and contracted by 3.5 percent, signaling that the Asian giant may be back in recession for the third time since 2007.

Even China — which has been a major engine of world growth since the Great Recession — is saying goodbye to the decades of double-digit annual growth rates that propelled it into an economic superpower, and is learning to live with slower growth. China has been hit hard by the recession in Europe, its biggest export market, and now expects growth to average around 7 percent in the years ahead — sluggish by Chinese standards.

The U.S. economy is not as reliant on exports for growth as China’s or Japan’s economies. Domestic industries power about 85 percent of U.S. economic growth on average. That is why some influential people are downright bullish about prospects for the U.S. even in a floundering world economy, as long as the leading economic power gets its fiscal house in order.

“The foundation of business is pretty strong. Housing looks like it is turning, household formation is going up, and consumers are still spending,” JPMorgan Chief Executive Jamie Dimon said on CNBC recently. “If we solve the short-term ‘fiscal cliff’ and the longer-run fiscal issues, the economy can boom.”

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