US recovery outpaces New Zealand
Tue, 22 Jan 2013 8:19a.m.
By Dan Satherley
The US economy faces challenges in the near future, but is showing more signs of life than our own, say business commentators here in New Zealand.
Recent GDP figures from the US put growth at 3.1 percent, ahead of New Zealand's 2 percent. Stumbling blocks ahead for the US include the debt ceiling and the fiscal cliff.
"I think there are still challenges… with the need to navigate through the debt ceiling, but looking beyond that, there is a degree of optimism," says Greg Smith, from wealth management firm Fat Prophets.
"The housing sector is turning around, and that's making people feel more confident about the outlook, retail sales are turning around, so Americans are getting out there and spending more.
"There are still challenges on the other side – the unemployment rate is still too high and that's one thing that'll be top of Obama's wish-list in terms of getting down over the course of this term."
3 News business editor Michael Wilson points to good profit results from key US companies such as General Electric as another sign the world's largest economy is back on track.
"It's a bit of a bell-weather stock, representing large parts of the US economy," says Mr Wilson.
"Its profit was up 9 percent, which exceeded expectations."
In fact, 70 percent of US companies reported profits beyond admittedly low expectations, says Mr Wilson. Even
Mr Smith says good results from large banks like JP Morgan and Goldman Sachs also serve as a "barometer" of what's happening.
"That's symptomatic of what's happening in the housing sector, so that's feeding through to lending and feeding through to the banks' earnings as well."
Some companies that might appear to be struggling are in fact doing quite well. Plane manufacturer Boeing recently had to ground its Dreamliner fleet, but the impact on its share price was minimal, only down 3 percent.
"The expectation is they will overcome these problems," says Mr Wilson. "It's making big profits at the moment. Its last profit figure, for the nine months of last year to September was US$2.9 billion, up from US$2.6 billion."
Tomorrow tech giants Google and Apple are due to report their latest profits. Apple in particular will come under close scrutiny – its share price has collapsed in recent months, falling from over US$700 in September to exactly US$500 today.
Back at home, Mr Smith says Prime Minister John Key needs to focus on getting our unemployment rate down.
"At 7.3 percent it's still very high, it's in fact a 14-year high last year, so I think we need to see improvements in that," says Mr Smith.
"It's not going to happen overnight. The good news is long-term unemployment's not that high, I think it's around about 10 percent, so the Christchurch rebuild is going to help, but I think we need further impetus, further investment there."
Mr Wilson says Fletcher Building's "astonishing" turnaround is another sign the Christchurch rebuild is kicking into gear.
"If you'd put a dollar into Fletcher Building six months ago, it would now be worth $1.50. They're up 50 percent in the last six months, which is a remarkable turnaround."
The unemployment rate is still key to the country's economic recovery overall, however.
"Of course if we get that unemployment rate coming down it's going to feed through into optimism, feed through into consumer spending, as we've seen in the US," says Mr Smith.
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4/02/2013 8:26:39 a.m.
Jees Mike its like you only see your side of the argument and refuse to see the whole picture. It's common knowledge in the US that the corporate tax rate, after loopholes and tax breaks, COLLLECTED, averages around 15%. There are some larger corporations that were paying 'NIL' tax or receiving rebates at the same time they were posting record profits. That cost the US taxbase billions of dollars and Obama has successfully gone to war against those loopholes while discussing a lower overall corporate rate.Its all about the Bush tax cuts that were in place until last year...? But you didn't mention those at all. They were introduced to give the 'job creators' a chance to get the economy going. The last decade and popular US opinion have realised that this premise was flawed, when you look at the net jobs gained during the W Bush years. The admin was bleeding 800 000 jobs a month in 08 when it left office. You frequently use the 'strawman' approach to an argument where you build up a false picture of opposing views,(the strawman), then rant about that false depiction. You are blatantly wrong about the theoretical US corporate tax rate at 35% and then use it extensively in your comment to prove your misguided point of view. Its exactly what you did in the Novopay debacle and you got that wrong as well...? Talk about the realities and not your strawmen Mike,you'll end up being wrong less often bro. Otherwise good luck on the island of one..
22/01/2013 8:46:58 a.m.
Adjust the US figures for its print money inflation and you find their growth lower than NZ's.What we have is inflation driven not growth. In typical leftist economic stimulas, create inflation which gives the appearance of growth in the short term, and in the long term lowers real wages.The US still not done anything to address its problems. They are still spending more than they can afford. They have excessive taxation which means tax they may have collected, by taxing excessively is moved legally off-shore. The average business tax rate in the world is around 20% and we have a global economy. This means that businesses will move profit to where they pay 20% vs the US 35%.Eg if Apple targets the 700 milion Chinese phone users, why would they move the profit earned in China back to the US to be taxed excessively @ 35% because of US greed? The profit was earned outside the US, and they can re-invest that profit for further growth outside the US. Basically the US is saying the US is a bad place to invest, thanks to excessive taxation.
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