The U.S. economy is gradually recovering from the unprecedented scale of the financial crisis. U.S. could significantly accelerate the growth of GDP, its export was raised to record highs and unemployment was reduced. America's position is still far from ideal but it is much better than, for example, in Europe and some developing countries.
In the last two weeks in the United States has been published many macroeconomic statistics, which showed that the country, as a whole, shows a very decent rate of recovery from the crisis, which in some ways can be compared to the damage of some war.
First, the country's GDP in the second quarter gained 1.7 percent year on year. In the previous three months the growth was only 1.2 percent. In parallel, was revised data for the last year and it turned out that the economy has been increased by 2.8 percent, not by 2.2 as was reported earlier. This is the best indicator of pre-crisis times.
Secondly, the balance of international trade again pleasantly surprised the analysts. Exports in July reached a record 191 billion dollars. The deficit fell to $ 34 billion against the forecast of 43 billion. This figure is also quite good considering the fact that five or six years ago the deficit has hovered around 70 billion per month.
Unemployment continued to fall, reaching in July just 7.4 per cent, while the economy added 162,000 jobs. Gaining work by more and more Americans should give its fruit by increasing spending by households and, therefore, spur domestic demand.
So, almost all indicators suggest that the new wave of crisis in America should not be expected. On the contrary, the country is developing very rapidly. It is a very impressive result on the background of stagnating Europe, which only managed to stabilize the situation on the brink of the abyss. What was the reason for the new American breakthrough?
First of all, it’s the policy of low interest rates. The Federal Reserve, at the end of 2008, took a willful decision to lower its key interest rate to the range of 0-0.25 per cent per annum. That was not enough and the U.S. regulator has started to buy U.S. government bonds, flooding the market with liquidity. Many researchers have warned against such a move, considering it dangerous in the long run but so far it's working. The Fed continued its supersoft credit policy and after a pause, it came to fruition.
First of all, low rates favorably affected the housing market. Banks reduced the cost of their loans following the Federal Reserve, and it has allowed citizens more or less freely borrow a mortgage. Although housing prices have remained very low for a long time, since the end of 2011 they began to gradually rise throughout the country. According to the latest statistics, in June 2013 they rose by 11.9 percent against the same month of 2012, which in itself is a good sign for the economy. Demand for real estate pulled a building and then other sectors of the economy.
EU also has a low interest rates but the result gained by them in the United States can’t be compared with Europe. Here comes into play another factor called "cheap hydrocarbons." The wide spread of new technologies has allowed to establish production of shale gas and shale oil. Many economists call a growth of shale gas sector, as well as the development of new robotics technology for industry, as the Third Industrial Revolution that Europe and many other world regions overslept and missed.
The excess of supply in the market has brought down the price of raw materials and as a result, the natural gas in the U.S. cost almost three times less than in Europe. In 2012 there was a period of extremely low prices: in April a thousand cubic feet (28.6 cubic meters) of the resource cost only $ 1.89. Now, for some reasons, there is a correction to $ 3.3, but it is three times less than five years ago.
Because of this, the U.S. was able to almost completely replace the gas import and thus greatly reduce the trade deficit. This had a very positive impact on GDP. But the main result of improvement in the hydrocarbon market is the low cost of raw materials for manufacturers. Falling costs has made production in the U.S. more profitable than ever over the last thirty years.
However, we should note that the "shale revolution" as a way to restore economic growth is not suitable for all countries. Now there are different estimates of shale gas reserves in different countries, but the case of the U.S., where production of shale gas and oil has turned out to establish relatively quickly, remains unique.
On the one hand, all the reserves in the U.S. are in easily accessible locations, on the other hand - the density of the population is small enough that it was possible to drill without much consideration for the environment.
A big role in the new rise of the United States also plays demographics. The population of the country continues to increase, mostly due to natural growth, providing to the economy a lot of working hands. At the same time, Europe and Japan still have a fixed demographic stagnation.
Graphics: Shale gas worldwide resources