By Morf Morford, Tacoma Daily Index
If you follow the gyrations of the national and global economy, you know one thing for certain – anything could, will and might happen. If the world economy were a multiple choice question as in the headline above, the answer would be obvious; c. All of the above.
China
For many years China had the most aggressively growing economy in the world. Their continued expansion impacted oil prices, availability (and prices) of building materials, interest rates and almost every other aspect of the economy – if not the everyday life of most of us. Like the USA, any glitch in the Chinese economy sends its (sometimes magnifying) ripples across the rest of the world.
After decades of exponential growth, China’s current economic environment, especially following the three years of zero-Covid policy, has impacted not just their economy.
That “exponential growth” was never sustainable, and even though their growth rate (most years) still outpaces ours, by Chinese standards, it is in decline. And any decline in an economy (and population) the size of China means trouble. For them. And us.
The sheer scale of the economy – and potential market – of China is staggering. Every move they make, and every direction they turn, impacts us all.
Like every major economy, China’s economy relies on a stable, if not robust real estate market. For a sobering, if not chilling, view of China’s real estate market, look here.
Meanwhile, back in the USA
Depending on who is talking, the US economy has never been stronger – or is on the verge of irrecoverable collapse.
Is the “Biden deficit” the worst in US history? Or is it the Trump related deficits?
As usual, in our much-befuddled atmosphere, partisan politics holds more sway than accounting.
And, as always, whether our experience matches, meets or exceeds our expectations has more to do with our consumer/economic confidence than anything else.
And, of course, as an election year approaches, deep-fakes, dubious statistics and outright deception will flavor any interpretation of the conditions we encounter.
Real gross domestic product (GDP) in the USA increased at an annual rate of 2.4 percent in the second quarter of 2023. In the first quarter, real GDP increased 2.0 percent.
Interest rates are expected to stay high. Or even go higher. To say that this puts a damper on the housing market would be an understatement. But higher interest rates are the usual remedy for inflation.
Trade deficits
The U.S. monthly international trade deficit decreased in June 2023 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit decreased from $68.3 billion in May to $65.5 billion in June. Like the 2 or so percent annual growth rate, the decline in the trade deficit is not great, but it’s not terrible either.
All politics is local. And so are economies.
The US economy is vast, with many corners, facets and moving parts.
According to the U.S. Bureau of Economic Analysis, “In 2021, personal income increased in 3,075 counties, decreased in 36, and was unchanged in 3. Personal income increased 7.4 percent in the metropolitan portion of the United States and 7.7 percent in the nonmetropolitan portion.”
From 2020-2021 the US economy grew by 7.5%. But that’s an average of some states/regions growing and some declining.
You can see a map of personal income change by county here.
Enter the politicians
For better or worse, you can always count on politicians to add layers or complications to an already complicated economy.
The partisan divide in our political atmosphere is reflected in the increasing likelihood of a US government shutdown in 2023 – probably sooner than later. A government shutdown isn’t terrible or necessarily long lasting (some have lasted only a few hours) or even terribly rare – we’ve had about 20 since 1976. You can see everything you (probably don’t) want to know about US government shutdowns here.
Uncharted territory
In short, the US economy is in flux, and depending on when it happens and how the economy responds, a government shutdown could be a minor glitch or the proverbial spark that starts the fire.
In other words, as multiple news anchors have said, in every arena from politics to weather to the economy and job market, we are in “uncharted territory”. I’m already tired of that term, but it seems to sum up where we are.
Where our journey is taking us is even more of a mystery.