Are US consumers over the worst?
Today's news that US consumer spending increased by 0.6% in March has been well received by the financial markets and is the sixth month in a row during which spending has risen. When you also consider that US gross domestic product, one of the more popular measurements for economic activity, increased by 3.2% annually in the first three months of 2010, perhaps we have a basis for hope in the future?
Unfortunately, the comparison between the European economy and the US economy could not be further apart at this point in time. We have the problems in Greece, which appear to have been overcome in the short-term, but there are concerns about Portugal, Spain and Ireland with regards to budget deficits and national debt. If the European Union is unable to inject more confidence into European investment markets then we could see further downward pressure in the short-term and calls for more bailout funding.
While US and Asian debt markets have been not been affected to a great extent by European debt problems there is no doubt there will be an impact the longer the European issue carries on. The US markets may well be performing better than expected but Europe could potentially hold back a strong worldwide economic recovery in the short-term.
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