Is America Poised to Lead the World Economic Recovery?

There is good economic news building this week - and wherever in the world you live, whether you are a business person or a salaried employee or looking for a job - the developing story will help you. The United States shows all the normal signs of being in the process of digging its economy out of the economic crisis that has engulfed the world sonce 2008. The February increase in retail sales of 1.1% was nearly double what many economists expected, and now they are now predicting economic better growth in the first quarter. Retail sales rose the most in five months even with higher taxes and rising gasoline prices. CNBC reports that Mesirow Financial economist Diane Swonk sees consumer confidence being related to the improvement in housing and rising home prices. "It really is important to understand the interactive role that jobs and wealth create together. The jobs picture has improved and while it is not perfect, it's important," she said. The February jobs report was also good, with 236,000 non- farm payrolls created. "That is one of the pivotal points, and it's been a real game changer," she said, predicting. first quarter GDP growth of about 2.5%, up from 2.1%. Swonk sees growth rising to 3.2% by the fourth quarter. Deutsche Bank chief U.S economist Joe LaVorgna says that he's not yet ready to predict 3%, but he says it's certainly a reasonable forecast. His published first quarter GDP forecast is currently 1.5%. "I am stunned at how resilient the consumer is ... we had high gas, slower(tax) refunds, horribly inclement weather, and the end of the payroll tax holiday — now these numbers are obviously susceptible to revision, and maybe March is weaker,...but consumer spending numbers look now that they're better than Q4....The bottom line is there's just much more momentum to deal with these headwinds. We can make it through like we couldn't a few years ago." Core retail sales, excluding automobiles, gasoline and building materials, rose 0.4%, up from 0.3% in January. High gasoline prices drove up receipts at gas stations by 5%, the biggest jump since August. Without gasoline, sales rose 0.6%. Auto dealership receipts increased 1.1%, after falling slightly in January. But LaVorgna is also wary of being burned."I feel like we've been here before," he said."It looks too good to be true that we're getting decent growth despite the headwinds." And perhaps the best evidence that America's economy is growing is that the Congressional Budget Office is forecasting that the budget deficit will total $845 billion. If correct, it will be first time the federal government hasn't run an annual deficit in excess of $1 trillion since 2008. The annual deficit is projected to be smaller this year because the government is collecting more revenue. At the same time, the government is spending less on some programs. That's in part because of spending cuts that were enacted under a 2011 agreement to raise the federal borrowing limit. Also, the improved economy has reduced demand for unemployment benefits and some other government programs. Last year, the economy grew at a modest 2.2% and generated an average of about 180,000 jobs a month. Stronger job growth is forecast for this year. More jobs mean more income, which generates more tax revenue for the government. Another factor in a smaller expected deficit is higher taxes for some Americans this year. When Congress and the White House reached a deal in January to avert the fiscal cliff, they allowed taxes to rise on high income individuals. And the agreement allowed a cut in the Social Security tax to expire, thereby raising taxes on nearly everyone who earns a paycheck. This year's higher Social Security tax is projected to raise about $10 billion more a month in revenue. The additional revenue is likely to slow the deficit's growth for rest of the budget year, which will end September 30. The CBO is projecting even smaller annual deficits of $616 billion in 2014 and $459 billion in 2015. While the US economy is showing real signs of the consumer confidence that must exist for the American economy to grow, things are gloomy in Europe. Germany and France, the Eurozone's two biggest economies, both recorded a 1.1% contraction in manufacturing, while data for Italy, Europe's third largest economy, was not available. The Eurozone reading may provide the European Central Bank with more of an incentive to consider cutting interest rates to below the current 0.75% rate later this year to lower the cost of borrowing for companies and households. A lower ECB interest rate would also drive down the Euro currency, which almost all analysts say is overvalued against the Dollar. A lower valued Euro would also help European export business, very much needed by Germany and France if their economies are to avoid slipping back into recession. So, dear readers, what the entire world desperately needs may actually now be happening. The American economy may be positioning itself to lead the global econony out of its crisis. It is eatly days, but let's watch with hope and growing confidence.