Last Week's Highlights

The pace of the U.S. recovery has not been very strong, by historical measure. The jobs report for May suggested the pace might even be slowing. This is at least consistent with the readings from the Leading Economic Index. Heading into the second half of the year, the story is one of slow growth, no inflation, and stubbornly high unemployment. Finally, these ingredients might also be consistent with relatively slow profit growth, certainly much slower than the record over the prior three quarters. That in turn might be an indication of a rather subdued stock market this summer. Then again, no repeat of very strong volatility might be a welcome respite.

THE SITUATION ABROAD

The Leading Economic Indexes across the globe are pointing to continued expansion, stronger in the Asia/Pacific region than in North America, which in turn has better prospects going forward than Europe. It is uneven growth to be sure, and risks abound. Extraordinary steps taken during the recession had a positive impact, but now are beginning to lose effect and will become steadily less relevant over the next year and a half. Conversely, austerity measures have been adopted. In Europe, the attempt is to limit debt growth. In some parts of Asia/Pacific, the attempt is to keep from overheating.

FACT OF THE WEEK

7.4 percent. China's economy is growing faster than any other in the world. But the rest of the Asia/Pacific region is also expanding robustly. India is growing at an 8.0-to-8.5 percent rate, not much slower than China. The six more advanced emerging economies in the region — Indonesia, Thailand, Singapore, Malaysia, the Philippines and Vietnam — are expanding at a combined pace of almost 7.4 percent. This is, in part, export-driven growth, but it is largely intra-Asian trade. There is the potential, however, for this robust growth, if it is sustained, to help build and develop their domestic markets.

QUESTION OF THE WEEK

Can economic growth in the Asia/Pacific region continue to be so much faster than anywhere else on the planet, especially if it is export driven?

China is growing faster than India. Much of the rest of East and South Asia is also growing rapidly right now. In part, these economies are experiencing a cyclical recovery. At least some of these economies are still benefitting from recession-era stimulus efforts. And export growth plays a large role in their growth.

One by one, these factors will gradually begin to lose some of their ability to power economic growth. Nevertheless, to the extent policies are enacted to help build domestic consumer and investment demand, robust growth can continue for some time.