America’s Recovery

America’s economy, which accounts for almost a quarter of global production, continued to recover in the first quarter and grew at 3.2 percent, driven by increased consumer spending. In contrast to this are the Europeans, who remain stuck in economic stagnation and are facing new, complex challenges stemming from their delay in addressing the Greek crisis. In the U.S., GDP continued to rise for the third consecutive quarter, and the recession seems to have been overcome. This improvement is reflected in the $147.6 billion increase in GDP, which is now estimated to be $14.6 trillion.

Economic expansion in America was higher during the last three months of 2009 (5.6 percent), but this was mostly due to inventory restocking. The quality of growth changed in the beginning of 2010. The rise in consumer spending at a rate of 3.6 percent provides greater stability to the economic expansion experienced at the beginning of 2010. The numbers published by the Treasury Department on Friday are preliminary figures and subject to modification, but the progress appears to be well-defined.

As predicted, the rate of unemployment continues to be high despite the rise in consumption and the 4.1 percent growth in nonresidential investment, especially in the software and equipment fields. During the previous quarter, private consumption had only grown 1.6 percent. Consumers chose to purchase mostly durable goods such as cars and electronics.

Since the end of 2007, approximately eight million jobs have been lost. Rehiring has just begun, and the replacement of displaced workers will take some time. In March, about 9.7 percent of the workforce was unemployed, a similar rate to that during the end of 2009.

Unemployment figures in rich countries may still rise in 2010 before they start to fall, IMF economists warned a few weeks ago. In the U.S., the estimated average for the year is 9.4 percent, a little higher than the 2009 average (9.3 percent). In the Eurozone, a higher increase is estimated: 9.4 percent in 2009 and 10.5 percent in 2010. Creating new jobs will also take longer in Europe, according to the IMF’s calculations.

The actual numbers could be different from the predicted ones, but given the recent evolution of the economy in the different regions, the pattern shown in these studies will probably be confirmed.

In the U.S., current market projections show an economic rise between 2.5 and 3.5 percent in 2010. The IMF estimates that the American economy will grow at 3.1 percent this year and at 2.6 percent next year. Eurozone estimates are a modest one to 1.5 percent. U.K estimates are 1.3 percent in 2010 and 2.5 percent in 2011.

If aid to Greece continues to be delayed, the prospect for European growth can worsen. The unrest felt in the financial markets could seriously affect other countries, making regional recovery more difficult. Governments of the largest economies decided to act only after downgrading the credit ratings of Portugal and Greece and after the latest wave of panic in the markets.

What remains to be seen is whether governments, starting with Germany, will progress from words to action. In the meantime, Greek, Portuguese and Spanish authorities are racing to publicize plans outlining adjustments in public funds to eliminate fears of further financial problems.

Once again, the American economy proves itself more flexible and agile than others in the rich world. In a short while, it will resume its role as the global locomotive, but this time, it will be on equal footing with the biggest emerging economies. The necessary adjustments to public funds and an increase in domestic savings, if confirmed, will make the U.S. a less dynamic market for foreign investors. It will continue to be the most important in the world, but it will also face much tougher competition from other exporters. Now this is the perfect target for Brazilian strategists.