WASHINGTON (AP) — As a
brutal winter yields to spring, the U.S. economy is showing renewed
strength just as other major economies appear desperate for help.
is clinging to a fragile recovery. Japan just imposed a tax hike that
threatens its shaky economic comeback. And China's troubles are rattling
the global economy.
The resilience of the U.S. economy, after a
growth-chilling winter, was evident in Friday's jobs report from the
Labor Department. It said employers added 192,000 jobs in March and
37,000 more than in January and February than previously thought.
the economy making steady gains, the Federal Reserve has been scaling
back its bond purchases, which have been intended to lower interest
rates to spur growth.
"The U.S. is certainly doing better than
Europe or Japan right now," says Nariman Behravesh, chief economist at
IHS Global Insight.
Here's a closer look at the rest of the world's big economies:
as the Fed reduces its stimulus in the United States, the European
Central Bank is considering further steps to help the 18 countries that
use the euro currency. The eurozone emerged from a recession — its
second in six years — last spring. But the recovery has been faint: The
eurozone economy is growing at a glacial 1 percent annual pace.
Draghi, president of the European Central Bank, last week expressed
concern about "protracted stagnation" and the eurozone's worrisome 11.9
percent unemployment, essentially unchanged from last year's record 12.1
In addition, inflation is running at dangerously low
levels. Consumer prices rose just 0.5 percent in the year that ended in
March. The ultimate fear is of deflation, when prices actually start
falling. Deflation would hurt growth because tumbling prices cause
consumers and businesses to postpone purchases and investments as they
wait for still-lower prices.
On Thursday, the ECB kept its main
interest rate unchanged at the record low of 0.25 percent. But Draghi
said the ECB was ready to use "unconventional measures" to combat
super-low inflation. The bank could further lower rates, offer cheap
loans to banks or embark on an uncharacteristic Fed-style stimulus.
eurozone faces another more fundamental problem: a credit crunch.
Banks, clogged with bad loans left from the financial crisis, aren't
lending to small and mid-sized businesses. And they probably won't until
they raise more money to cover potential loan losses.
still in convalescence," says Gustavo Reis, global economist at Bank of
America Merrill Lynch. "The economy has been growing since the second
quarter of last year. But they need to see significant credit growth."
economists at Citi Research expect the eurozone economy to pick up
somewhat this year, growing 1.3 percent after shrinking 0.4 percent in
Japan's economy, enduring a two-decade slump,
received a jolt last year from "Abenomics." That's the name for policies
pushed by Prime Minister Shinzo Abe to try to spur inflation and
generate growth by getting consumers and businesses to spend now, not
But Japan's efforts to invigorate the economy through
government spending have strained its finances. The government's debt
is twice the size of Japan's economy — by far the highest debt burden of
any advanced economy. To reduce the debt, the government has raised the
country's sales tax from 5 percent to 8 percent.
economy, No. 3 worldwide, looks weaker than it did last fall when Abe
agreed to the tax hike. A quarterly survey last week showed that
Japanese businesses fear that consumers will respond to the higher sales
tax by pulling back on spending. That's what happened the last time
Japan raised its sales tax in 1997. Citi forecasts that Japan's economy
will grow just 0.9 percent this year, down from 1.5 percent in 2013.
the government and the Bank of Japan may try to soften the blow. Abe
has promised 5 trillion yen ($48 billion) in fresh stimulus for the
economy — more if the tax hike inflicts more economic damage than the
government expects. The Bank of Japan could also intervene with
Fed-style bond purchases if the economy needs further help.
"BOJ will have to act," says William Lee, global economist at Citi Investment Research. "The question is when."
the world's fastest-growing major economy, is slowing. Part of the
deceleration from the sizzling double-digit increases of recent years is
deliberate. Chinese policymakers want to create a sturdier economy,
more dependent on consumer spending and less on exports and investments
in infrastructure and real estate. And they're willing to accept slower
growth to get there.
But now they fear that the economy is slowing
too much and won't meet their 7.5 percent growth target. So Prime
Minister Li Kequiang last week announced a mini-stimulus program: It
will give small businesses bigger tax breaks, expand railroads and
replace shantytowns with permanent housing.
But IHS' Behravesh
says the stimulus will merely postpone a reckoning. China's investment
boom, during which it built an overabundance of factories and houses,
was financed with enormous debt, much of which is unlikely to be repaid.
Over the next five years, Behravesh expects China's economic growth to
slow significantly — to below 5 percent a year as the nation reforms its
A sputtering Chinese economy would hurt other countries that supply it with raw materials and do businesses with its companies.
"The Chinese story is one that's casting a big black cloud over the rest of Asia," Behravesh says.