The balance of world economic growth is tipping in another direction. Just as economists have begun lowering their forecasts for China and many other developing economies, the American economy is bouncing back. Japan appears to have turned a corner and is ending almost two decades of grinding deflation. Economic data out of Europe on Wednesday provided the first solid indication that many countries in the euro zone may be escaping the clutches of recession.
The gross domestic product of the 17-nation euro zone grew at an annualised rate of about 1.2% in the second quarter. It is certainly not clear, based on only three months of data, that Europe?s recession has ended. But it is further evidence that the older engines of growth are revving into gear as the most recent sources of growth have been slowing down.
?The general proposition for much of the last generation has been that emerging markets grow faster. That?s what?s changed,? said Neal Soss, the chief economist at Credit Suisse.
?The acceleration such as it is happening is in the first-world economy rather than the emerging markets.?
The growth of the BRIC countries ? Brazil, Russia, India and China ? has raised living standards in those nations and in others in Southeast Asia, Latin America and Eastern Europe. Those four nations had an even broader global impact by also providing new markets for American products while its citizens made the electronics and other products wanted by consumers in the US and other developed economies.
So a decline in their growth rate should be worrisome to the US. But Jim O?Neill, the Goldman Sachs economist who coined the term BRIC more than a decade ago, thinks one of the new beneficiaries of the shift in the global economy is most likely to be the Us. ?I find myself thinking the US is going to be one of the biggest winners,? said O?Neill.
It could gain from the Chinese government?s stated intention to shift from big government investment projects to a more consumer-driven economy. That could create demand for American products, while making commodities cheaper for American companies. Rising wages in China could also encourage manufacturing in the US.
There were signs in recent trade statistics that this shift may already be under way. Exports from the US to China grew in June while imports from China declined. The overall US trade deficit dropped to its lowest level since 2009. China?s newfound restraint is at the fulcrum of the shift. Its government is trying to temper the economy, the largest among the developing nations. In doing so, it shoulders much of the blame for the slowdown elsewhere in Asia and in Latin America. The price of commodities like iron and copper, which previously buoyed the developing countries producing them, are now sinking as Chinese leaders are reining in the grand developments that needed metals.
