Why The US Economy Is Doing Better Than Everywhere Else In The World

With the latest batch of manufacturing data out, it couldn't be more clear that the US economy is outperforming the rest of the world.

As far as big economy's go, we're pretty much the world's last best hope.

But beyond the sheer numbers, a more interesting question might be: why is the US doing so good?

We'd point to a few reasons.

1. Excellent policy out of Washington DC.

No, really! Despite the utter dysfunction, the US has not (yet) succumbed to the global austerity wave, as fiscal policy has remained incredibly accommodative.

You can see that deficits compared to GDP have been extraordinarily high in recent years, meaning plenty of firepower.


Compare that to England (where David Cameron) came in with a mandate to cut spending, or the Eurozone where, well, you know... and you can't not conclude that US policy is stellar.

2. A balanced economy, not too dependent on exports.

Unlike China and other hot emerging markets, the US is not all that export reliant. Sure, we trade massively with the ret of the world, but as a country that does not rely on its trade surplus for growth (unlike China), weakening of demand in Europe

3. Housing.

This was at the center (or near the center) of the crash, but now it's coming back on virtually all measures.

At a time when other economic factors are proving to be impediments, this is a nice (and arguably surprising) shot in the arm.

There are other factors that make the US generally good (a good climate for business, silicon valley, etc.). But these are three trends that define the current landscape.

US Manufacturing Grows Faster Than Expected

UPDATE:

Manufacturing in the U.S. expanded at a faster-than-anticipated clip in August but remained near recent lows hit earlier this summer, new data out of Markit Economics shows.

The key business activity index improved 50 basis points from the July print, hitting 51.9.

A reading above 50 indicates expansion.

New orders and output from the nation's factories jumped in the newest report, hitting 52.6 and 52.4, respectively.

"Reflective of the increase in new orders, backlogs of work rose for the first time in three months during August," Markit said in its statement. "Stocks of finished goods meanwhile were depleted, in contrast to the accumulation reported one month previously.

Employment in the manufacturing sector also rose during the month, but did so at a lower pace than in July.

Below, key output from the report:


Markit August Flash PMI


Markit August Flash PMI

With this fresh batch of Flash PMI numbers, it couldn't be more clear that the US economy is the strongest in the world.

The Chinese Flash PMI fell to a 9-month low.

Germany's Flash PMI came in at 45.1. That's a bit above the previous month, but still well below 50, meaning its in contraction.

The US on the other hand rose from 51.4 to 51.9, and lots of the internal numbers were good, including New Orders.

That's consistent with other data, which shows the US economy improving over the last month and a half. Included in that is solid housing data, improving initial claims, and a bounce-back in retail sales.

Probably our favorite chart to demonstrate the US' outperformance actually came from Japan.

It shows the year-over-year change in Japanese exports to China, the US and Europe.

Only the US is in positive territory.

There's a lot not to like about the US economy (8.3% unemployment most prominently), and there's a decent chance that the weakness around the globe will continue to spill over onto our shores, but compared to the crap-show in the rest of the world, the US is doing alright.