Since the second half of 2009, the U.S. economy has achieved a strong recovery, driven by three major factors: restocking, improvements in financial markets, and massive monetary and fiscal stimulus. The European debt crisis has further triggered a massive repatriation of U.S. dollars, widening the divergence in recovery between the U.S. and Europe.
In the first quarter of this year, compared to the meager 0.2% growth in the Eurozone, the U.S. GDP growth rate reached 3%. The escalation of the European debt crisis does not appear to have had a substantial impact on the U.S. economy. Is the U.S. economy out of the woods? Risks know no borders; with the subprime mortgage crisis still fresh and the European debt crisis looming, the risk of future volatility in the U.S. economy cannot be ruled out.
First, the stimulus effect of policies is waning, and the pace of future economic recovery will slow down.
According to the latest assessment by the Congressional Budget Office (CBO), as homebuyer tax credits, corporate tax cuts, and state government fiscal aid policies expire and are phased out, the stimulus effect of previous U.S. fiscal policies will gradually diminish starting from the third quarter of 2010, and may even act as a drag on growth.
On one hand, in terms of GDP growth, U.S. government spending, which reflects the intensity of policy stimulus, dragged GDP down by 0.37 percentage points in the first quarter of this year, an increase in negative impact of 0.11 percentage points compared to the previous quarter. On the other hand, in terms of leading indicators, the Conference Board's Leading Economic Index for the U.S. fell by 0.1% month-on-month in April, marking the first monthly decline since March 2009.
Among the 10 leading indicators, while four indicators—interest rate spreads, stock prices, average manufacturing workweek, and new orders for non-defense capital goods—rose month-on-month, six indicators—building permits, vendor performance, real money supply, moving average of initial jobless claims, consumer expectations, and new orders for manufacturing consumer goods and materials—all declined, reflecting a slowdown in economic growth over the next six months.
Given that the recovery in actual final demand remains weak, and with changes in the inventory cycle and the weakening of policy stimulus effects in the second half of the year, the U.S. economic growth rate is expected to moderate.
Second, three major factors are creating constraints, and sustainable consumption growth faces challenges. Based on the current situation, although U.S. personal consumption expenditure grew by 1.3% in the first quarter, uncertain risks affecting U.S. personal consumption persist, posing a serious challenge to the sustainability of the consumption recovery.
Generally speaking, real income (current and expected), credit growth, and the propensity to consume are the three most important variables determining consumption. Looking at these three factors, it is difficult for future consumption to shoulder the burden of leading the economic recovery:
First, the three-month moving average of real personal income growth remains at a historical low without a clear upward trend; the slow recovery of real personal income will inhibit a rapid rise in personal consumption expenditure.
Second, sluggish consumer credit hinders the recovery of consumption. Judging from the write-off and default rates of real estate loans and personal credit card loans in commercial bank credit, the recovery vitality of these two major markets is insufficient, which will have a negative impact on the sustained growth of the U.S. recovery in the future.
Third, the propensity to consume has changed significantly. Against the backdrop of persistently high unemployment and no significant increase in household wealth, the U.S. propensity to consume has shifted rapidly. In March 2010, the U.S. household savings rate had fallen sharply from its peak of 6.4% during the crisis to 2.7%. The rapid decline in the actual propensity to save suggests that current U.S. consumption may be overdrawn in advance, and sluggish future consumption growth is inevitable.
Third, as stimulus policies fade, the U.S. real estate market faces a risk of a secondary downturn. With the withdrawal of stimulus policies for the U.S. housing market, the real estate market remains the core of the fragile economic recovery.
First, oversupply in the real estate market is still accumulating. Currently, the number of residential foreclosure cases is constantly increasing. In the first quarter of 2010, 900,000 homeowners received notices of foreclosure from banks. From January to March this year, the total number of homes foreclosed and auctioned by banks nationwide increased by 35% compared to the same period last year.
In addition, the number of homeowners facing foreclosure and auction crises increased by 16% compared to the same period last year and by 7% compared to the previous quarter. Based on current trends, the total number of homes foreclosed and auctioned by banks by the end of this year will exceed 1 million.
The increase in foreclosures not only causes the scale of bank bad debts to continue to expand, but also further worsens the oversupply situation in the real estate market as banks list a large number of foreclosed homes for sale to recover funds.
Second, there is room for a 5%-10% decline in real estate prices. The S&P/Case-Shiller Home Price Index shows that U.S. home prices rose by 2% annually in the first quarter, the first annual increase in recent years. However, due to the end of tax incentives and the continued increase in foreclosures, home prices in the first quarter still fell by 3.2% compared to the fourth quarter of 2009.
Meanwhile, U.S. home prices fell for the sixth consecutive month in March. Among them, home prices in eight major metropolitan areas hit new lows, namely Atlanta, Charlotte, Chicago, Detroit, Las Vegas, New York, Portland, and Tampa. Existing home sales in the U.S. rose by 7.6% in April.
In addition, the real estate foreclosure rate will continue to deteriorate. The U.S. housing foreclosure rate increased by 16% year-on-year and 7% quarter-on-quarter in the first quarter, with the number of foreclosures reaching 932,000. The number of foreclosures in April continued to rise from March, reaching a record 92,432. Furthermore, data from Zillow.com shows that in the first quarter, more than 1/5 of U.S. property values were lower than the mortgage amount, with the proportion rising from 21% in the fourth quarter of last year to 23%.
Fourth, risks have not been eliminated, and how to clear toxic assets will be a major challenge. After the bursting of the subprime mortgage asset bubble, a large amount of toxic assets were brought into the U.S. financial system. These toxic assets have basically not been dealt with; instead, accounting rules were modified and debt settlement was frozen to temporarily cover up the bad debts of financial institutions or move them to the Federal Reserve's balance sheet.
Since last year, the bad debt rates for U.S. mortgages and credit card loans, as well as the housing foreclosure rate, have remained high. Therefore, how to repair the balance sheets of financial institutions and the Federal Reserve and clear toxic assets will be a major challenge facing the U.S. in the future.
In view of this, and considering the U.S. economic volatility and rising unemployment, Worldway Immigration has noted that U.S. government agencies abroad have recently begun to actively advocate that citizens who wish to become U.S. citizens can use the "investment immigration" route to quickly obtain citizenship. Since investment immigration can not only attract foreign capital, promote U.S. economic recovery, and create job opportunities, but also help investment immigrants become U.S. citizens through an efficient method, it is mutually beneficial.
Every year, the U.S. provides a total of 20,000 investment immigration opportunities. The rate of using investment for immigration from China will increase significantly in the future. Coupled with the fact that the U.S. has recently invested large amounts of capital and manpower into the scope of investment immigration to encourage it, the prospects for investment immigration are promising.
The amount required for investment immigration varies by region, ranging from one million to five hundred thousand. In addition to the investment, ten job opportunities must be provided to be issued a two-year conditional immigration visa. If the investment still exists and is operating normally 90 days before the expiration of the two-year period, the investor can apply to have the conditions removed, thereby obtaining formal permanent residency.