Signs of modestly higher inflation and a robust jobs market in the U.S. have many economists cheering the recovery in the world's largest economy. Despite this optimism, one asset management firm has signaled that this could mean a gloomy future for the rest of the world.
Last week, U.S. consumer prices for April recorded their largest increase in 10 months – in stark reflection to concerns about falling and low prices in Japan and the euro zone. U.S. stock markets continue to outperform the global index as the traditional engine room of global growth edges back to full power.
U.K.-based global asset manager Schroders says U.S. activity looks set to accelerate as we head into the summer. In a new note on Friday it detailed the different reasons behind this pickup, but adds that these same reasons could be ready to hit exporters and destabilize growth in the rest of the world.
"The U.S. is likely to be less of a locomotive for global growth than it has been in previous cycles. Consumer spending is likely to be more lackluster and, of the demand generated by the U.S., more is likely to be met by domestic rather than overseas production," its analysts said in the report.
"It is not good news for the rest of the world particularly those economies which have relied on selling to the U.S. The emerging markets are vulnerable in this respect."
Trade balance data for March showed that the U.S. currently imports $40.38 billion than it exports, according to Reuters data. However, before the financial crash of 2008, this was significantly more with the country regularly posting trade deficits of over $60 billion.
According to Schroders there are four reasons why a repeat of the pre-crisis trade boom days are a long way off: