The State of the World Economy
The global economy is essentially dependent on the growth of the U.S. It is a force in the world economy because for the first time in 10 years, the country. is experiencing a higher level of economic growth. America has basically been struggling since 2005, with high gas prices, high unemployment rates and consumer who were scared to part with their money. What may play out well for the U.S. is the fact that the country relies very little on exports, when compared to other countries. Yet many countries depend on the success of economic growth in the U.S.
Reasons for the Strengthening U.S. Economy
Nothing makes people hold onto their money more than a recession. Even the threat of a recession makes consumers nervous about making any kind of purchases. But when the economic outlook is good, they have a renewed sense of confidence and feel more comfortable parting with their hard eared money. There are a number of reasons why the American economy is finally bouncing back after a long rough patch. Some of the main reasons include:
- Lowered Gas Prices. Earlier this year gas prices took a nose dive. Nothing fuels the economy better than low gas prices at the pump. Instead of paying four or five dollar per gallon, consumers are now paying around two dollars per gallon. This allows people to travel more, not hesitate to drive a little further to go out for dinner and even plan a road trip since gas process are so much more affordable.
- Job Growth. Unemployment rates have decreased in the last six months and that also helps boost the economy. New construction, auto industry growth and raising the minimum wage have all contributed to the fact that there are more job options than even a year ago.
- Increase in Auto Sales. As the economy bounced back, so has the auto industry and this is big business in the U.S. Not only are the big three auto makers profiting from the increase in sales, but it also has a trickle down effect on the manufacturers, part supplies, car dealerships, salesmen and more.
- Lower Consumer Debt. As consumers pay off their debts, it creates a prime opportunity to make larger purchases and take out loans. Consumer spending puts money back into American businesses and creates a positive cycle of spending.
- Higher Cost Venture Capital Deals. The recent trend is for start-ups sell for much higher rates than in the past, with record-breaking deals made in 2014. As more entrepreneurs develop creative ideas with the technology filed to help consumers do things in an easier, user-friendly way, venture capitalists are willing to pay more than ever to get in on the ground floor. The result is major profits, for both the start-ups and the corporations buying them out.
All of these circumstances create a better sense of confidence for consumers, making them feel more comfortable spending money and driving the economy.
The Economic State of the World
While the U.S. economy is experience a long-awaited high, other countries are not doing as well. China has experienced steady growth in recent years, and while they won’t enter a recession by any means, their economic growth is slowing. After a huge investment period, venture capitalists and consumers alike are cutting back on their spending, making it unclear what exactly will spur on the economic development of the country. They may only see half of the growth they saw in 2014. Europe is also having slower economic growth. On the down side, however, Russia is heading for a recession and thanks to a sales tax hike in 2014, Japan has entered a recession.
The Effect of the U.S. Economy on the Rest of the World
On the bright side, a strong U.S. economy is good news for the global economy. We rely on a good deal of foreign products and the trickle down effect can definitely make a difference, even in other countries. Overseas investors are also showing interest in providing private equity for new American start-ups. These capital venture deals can be very lucrative, putting more money back in their own economy as well.
Posted on May 1, 2015, in Effi Enterprise, VC Firm, Venture Capital, Venture Capital Markets and tagged economic trends, Global economics, International VC Market, Venture Capital. Bookmark the permalink. Leave a comment.