BY MAULDIN ECONOMICS
There is concern over the chance of a cyclical recession in the US in 2017. The US is the most powerful and important country in the world. Its fate in 2017 will affect the globe. A recession in the US would be a big challenge for major exporters to the US, such as Germany and China. The US is also the world’s biggest importer. 14 percent of global imports in 2015 were to the US and other countries need US demand of their goods for economic growth.
National economic strength has often been proved by exports. The 2008 financial crisis made exporting countries weaker. The crisis shrunk demand for imports in the US and the EU. This made exporting countries unstable. They have still not settled.
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In 2017, countries that are self-reliant and those that aren’t will be divided. Saudi Arabia, Russia, China, and Germany are not self-reliant. China has already lost export revenue due to less demand. Germany has not, but is waiting for this in 2017.
Germany and the US are most important
Germany and China would both suffer from smaller US demand. Their wealth keeps the world’s economy stable. The US is a major market for Germany. 9.5 percent of German exports went to the US in 2015, according to UN Comtrade. These exports were mostly machinery, cars, and pharmaceuticals.
But the latest data from the US Census Bureau shows that US imports from Germany went down by 18 percent in October from October 2015. From January to October 2016, they went down by 8.5 percent year over year.
Also, a German government report said that their exports fell 10 percent year over year in July. This this was mostly due to less US demand for German goods. This is bad for German businesses that needed the US as the European economy slowed.
US imports from China have also dropped this year from 2015. But there were still gains in June and July. US imports of Chinese goods were about 4 percent lower than the same time last July. German goods were less wanted in the same month. But 18 percent of China’s exports go to the US. This could impact weak Chinese businesses.
Germany and China would suffer more if there was a US recession. Geopolitical Futures will be watching US economic signs closely for any more shifts. An early sign of a recession is prices going up for different products. This means less of those products. Also, the economy is at a limit.
This is not normal
It can be easy to think this is normal. The old rules don’t count. Also, the normal business cycle has been shut down. Former US Federal Reserve Chairman Alan Greenspan called this an “irrational exuberance” just before the economic crash that starts a recession.
The best experts can’t predict a recession. If they could, we would be rich. Recessions mean a good economy. A recession gets rid of weakness and excess. It means pain now but gain later. A US recession in 2017 is worrying. Export-dependent economies are at risk. Any big drop in US demand could badly affect exporting economies like China and Germany.