Goldman says US won’t be hurt by global slowdown

Sean Gallup | Getty Images

Sean Gallup | Getty Images

Here’s where a $40 billion trade deficit comes in handy.

Because the U.S. has such a sharp imbalance between what it imports and exports, expected global weakness ahead likely won’t have a severe effect on domestic economic growth, according to a report this week from Goldman Sachs economists.

In fact, Goldman held firm to its forecast that the U.S. will significantly outperform much of the developed and emerging world—a 3 percent rise in gross domestic product for 2015 against an expected gain of just one percent or so for Japan and the euro zone. Goldman has cut its forecast for non-U.S. growth by half a percentage point but is holding fast to its expectations for the U.S. itself in the longer term even though it recently reduced its third-quarter GDP outlook.

“At a time when domestic growth drivers are clearly picking up, we see several reasons for optimism,” Goldman economists Jan Hatzius and David Mericle said in a report for clients.

Paramount among those reasons is the simple fact that the U.S. doesn’t depend on foreign markets to buy its goods.

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The U.S. had a trade imbalance of $40.1 billion for August, fairly consistent with recent months and within the range where it’s been for the past three years or so. At $2.08 trillion, exports made up just 13 percent of the total $16 trillion of U.S. GDP in the second quarter.

Conversely, personal consumption amounted to $10.9 trillion, about 68 percent of the total economy.

Translation: Because the U.S. is such a consumer-based rather than a production-focused economy, it is not dependent on foreign markets to sell its goods. In fact, the global slowdown has resulted in a rise in the U.S. dollar, providing increasing purchasing power for U.S. consumers.

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The Goldman report not only suggests that the U.S. is poised to grow more quickly than other economies but also that such a disparity isn’t anything out of the ordinary despite years of sluggish U.S. growth.

“The extent of the U.S. growth outperformance is not unusual by historical standards,” Hatzius and Mericle said. “Performance gaps between advanced economies are at or below the long-term historical norm, and emerging economies continue to grow faster than advanced economies, though the gap is smaller than the average of the last decade.”

Of course, if the Goldman forecast holds the trend is bound to raise questions over why the Federal Reserve remains in crisis mode in terms of monetary policy.

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And the analysis does concede that there are two factors that could derail the thesis: If the global slowdown becomes more severe than anticipated—”an outright recession in Europe,” which is not out of the question—or if the market reaction, such as the Oct. 15 stock and bond market whipsaw action, were to persist.

“A renewed and stronger reaction by U.S. equity and credit markets to global growth fears would have a more substantial effect on U.S. growth,” Hatzius and Mericle said. “However, we share the views of our equity and credit strategists that the recent market weakness is likely to prove temporary.”

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