US on a roll as Europe slides and China slows

The United States once again may be emerging as a main engine for global growth - and at an opportune time, as Europe slides into recession and China's economy decelerates.

An improving job market, rising stock prices and easier credit are combining to lift US consumer confidence and spending, with optimism measured by the Bloomberg Comfort Index near a four-year high.

Personal-consumption spending increased by the most in seven months in February, rising 0.8 per cent, the Commerce Department said last week.

"We're entering a sweet spot for the economy," said Allen Sinai, president of Decision Economics in New York.

"We're in a self-reinforcing cycle," where faster employment growth leads to higher household income and increased consumer spending.

International companies, including Milan-based Gianni Versace, already are benefiting. Revenue for the Italian designer will rise at a "really strong double-digit" pace this year in the US, according to chief executive Gian Giacomo Ferraris. "America is doing fantastic," he said.

The blossoming of the US expansion comes amid a slowdown in China, until now the pacesetter for the world.

While a purchasing-managers' index rose to a one-year high in March, according to China's logistics federation and the National Bureau of Statistics, analysts said the gain was seasonal and pointed to a separate index produced by HSBC Holdings and Markit Economics that showed manufacturing contracted and export orders fell last month.

Premier Wen Jiabao cut this year's growth target to 7.5 per cent last month from an 8 per cent goal in place since 2005. That's down from last year's 9.2 per cent expansion.

The 17-nation euro-area, meantime, is flirting with recession after gross domestic product fell 0.3 per cent in the fourth quarter, the first contraction since 2009. Unemployment rose to 10.8 per cent in February, the highest in more than 14 years, reports showed.

The US trade deficit widened 4.3 per cent in January to US$52.6 billion, the largest since October 2008, as imports rose to a record high.

US households spent US$10.7 trillion in 2011, accounting for about 70 per cent of GDP, according to the Commerce Department. That's more than China's total GDP of US$7 trillion last year, based on International Monetary Fund figures.

The US dollar also will benefit, said Stephen Jen, a managing partner at the London-based hedge fund SLJ Macro Partners. He predicts it will rise toward parity with the Australian dollar.

- Bloomberg