While the US is showing signs of life with the economy, Europe and China are showing signs of trouble ahead. US companies have been doing well with overseas business so the news of problems abroad will not be good. In Europe's case, the economy barely kept its head above water last quarter and will likely fall when the numbers for January through March are calculated.
GDP in the single currency area fell 0.3% in the fourth quarter of 2011 in the first contraction since the eurozone left recession in 2009. Confirming its previous estimate, the European Union statistics office, Eurostat, reported falling activity across the board. As businesses and households alike battled rising unemployment, austerity measures and ongoing worries around the sovereign debt crisis, consumer spending was down 0.4%, exports fell 0.4%, government spending fell 0.2% and industry dropped 2%. Net trade helped stem the fall in overall GDP but that was merely because imports to the troubled currency zone tumbled 1.2%.In the case of China, the growth is still high but probably not high enough to absorb the even stronger need for new jobs to keep afloat with the growing work force. China also has the challenge of a government-fueled real estate bubble, plus a weak export market. We no longer live in a bubble, so these troubled economies will certainly impact the US. The only question is how much of an impact, when they decline.