The USA – public debt challenges
The U.S. economy has now expanded continuously for over 10 years, the longest such period in over 150 years. But there are structural changes that represent challenges for policymakers. Perhaps the greatest concern arises from the level of public sector debt, which is on track to reach its highest level since 1946. More positively, the U.S. can operate at lower levels of unemployment without generating upward pressure on inflation. Finally, the resurgence of the oil industry and the emergence of the U.S. as a net exporter of oil is a positive for the economy because it is not reliant on the Middle East for supplies. But again, it is one that requires an adjustment in policy responses and may introduce greater volatility to the economic cycle. Now a lot of investment and spending is tied into the oil market therefore this could increase volatility in the oil sector.
Michael Taylor, Chief Economist at ACCA said: ‘The articles in the Global Economic Themes report look at economic issues that are likely to have an impact over the longer term.
‘Through much of last year, US-China trade tensions increased which undermined business confidence and investment as well as contributing to a sharp slowdown in global trade. A recent improvement in trade relations resulted in a ‘Phase One’ trade deal which included a modest reduction in some tariffs.’
Taylor added: ‘China’s economy now faces very serious challenges with the coronavirus epidemic. Extended factory closures and travel restrictions may well completely stall the economy in the first quarter of the year. But provided the virus is brought under control soon, we would expect activity to recover fairly quickly later in the year. However, a prolonged crisis could result in a more permanent reduction in Chinese economic growth for example, if there were significant job losses that further reduce consumer confidence and spending.’
Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, said, ‘We saw confidence in the U.S. tread low throughout the year before an uptick in Q4. The economy continues to expand, and fears of a recession have quelled with continued consumer spending and rising wages. With 2020 being a U.S. presidential election year, confidence should continue to move upward.’