Even with ho-hum growth, the U.S. is starting to look like an outperformer in a world where Britain and the rest of Europe are in a double-dip recession, Japan is falling into what may be a triple-dip downturn, and some formerly robust emerging markets recently have slowed to a near-standstill.
The U.S. economy grew at a 2.7 percent annual rate in the summer quarter, the government reported Thursday — an average performance by historic standards. But the domestic economy looks better when compared with its zero-growth peers in the developed world and even a few former star performers, such as Brazil, where economic momentum was nearly snuffed out for a quarter earlier this year by a drop in exports to Europe and China.
"The U.S. has been doing better than many other countries the past few years and has proven to be resilient to the European debt crisis and slowdown in China," said Gary Thayer, chief macroeconomic strategist at Wells Fargo Advisers.
While the public, the press and investors have tended to focus mainly on the economy's shortcomings — including still-high unemployment at 7.9 percent and a collapsed housing market — lately they are starting to see the glass as "half-full," rather than "half-empty," he said.
"The U.S. economy faces many challenges," he said, but we should "start acknowledging the good things that are happening today."
The economic growth report from the Commerce Department showed that one major boost to the economy in the past year has been the fledgling recovery in the housing market, which had been in a deep depression between 2006 and 2011.
The comeback in home sales and prices, in turn, is helping to spark a rise in consumer confidence and spending — the biggest engine for the economy. Consumer spending has revved up in recent months, led by robust auto sales, and even posted records for sales at the start of the critical Christmas season despite some choppiness in the economy caused by Superstorm Sandy.
The consumer rebound also reflects the better financial condition of American households after several years of paying down debt and bolstering savings, even though income growth remains weak, Mr. Thayer said. Among the other positive developments he cited are a more than doubling in stock values since the market hit bottom in March 2009, and record corporate profits accompanied by gigantic cash holdings at many businesses.
Wary of global downturn
U.S. businesses have been refraining from deploying their mountains of cash, holding back on hiring and investing in recent months, because of worries about the sputtering global economy and the political fight in Washington over the "fiscal cliff" of $500 billion in tax increases and spending cuts looming at the start of the new year.
But if Congress and the White House are able to resolve those issues without greatly disrupting the markets or the economy, businesses could deploy that cash quickly next year and help fuel an economic renaissance, analysts say.
"Uncertainty is restraining gains in economic activity, stock prices and interest rates," said David Kelly, chief global strategist at J.P. Morgan Funds. But "once the fiscal fog clears, all three could move higher."
Mr. Kelly said the economic problems in the U.S., while substantial, pale in comparison with those in Japan or Greece. Even after receiving a more generous loan deal from the European Union and International Monetary Fund this week, many analysts say, Greece is still drowning in debt and may eventually have to walk away from the debt entirely or exit the eurozone to get its economy out of a deep recession.
Greece's economic situation, with more than 25 percent unemployment, rising homelessness and protests in the streets, is "disastrous," said Mr. Kelly, while Japan "is hobbled by excessive debt and political stalemate" that dim hopes of saving the country from yet another recession.
Economists say the U.S. could succumb to the global malaise if missteps in Europe or Washington lead to a sudden breakup of the eurozone or big tax increases and spending cuts that would cut short the economic recovery.
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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