global woes, stock slide don't mean us recession
TRANSCRIPT
Global Woes, Stock Slide Don't Mean US
Recession
Contd…Last week's harrowing plunge in US stocks -fuelled by economic fears about China and plummeting oil prices -left investors anxious and alarmed. Some wondered if it signaled an approaching recession in the United States. The answer, most analysts say , is no. The American economy is expected to prove resilient and nimble enough to avoid serious damage, at least anytime soon. For all the economy's challenges, the job market is strong, home sales are solid and cheaper gasoline has allowed consumers to spend more on cars, restaurants and online shopping.The companies that make up major stock indexes are far more vulnerable than the economy itself is to distress abroad: Companies in the Standard & Poor's 500 index derived 48%of their revenue from abroad in 2014, up from 43%in 2003.By contrast, exports account for only about 13% of the nation's gross domestic product -the broadest gauge of economic output. That's one of the lowest such shares in the world. Exports to China equal just 1% of GDP .
Contd…“While the US economy's exposure to China is relatively small, the multinational companies that trade on the stock market are much more exposed,'' said Mark Zandi, chief economist at Moody's Analytics.The S&P 500 sank 2.2% Friday and has tumbled 8% since the year began, deflated by expectations of even lower oil prices ahead and fears that China's once-explosive economy is slowing more than anyone had expected. On Friday, the Xinhua news agency reported that Chinese banks reduced loans last month from a year earlier. It was the latest sign that China's economy continues to decelerate -an ominous trend for US companies, like heavyequipment maker Caterpillar, that have significant bu s i n e s s t h e re.(Caterpillar shares shed 2.7%Friday .) The disconnect between the actual economy and the price of stocks isn't new. From the waning days of the Great Recession into the tepid recovery that followed, stocks managed to gradually rise despite persistently high unemployment and tepid economic growth. Now, the opposite seems true.
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