Today’s Organization for Economic Cooperation and Development’s Composite Leading Indicators signal demand abroad is on a path of improvement for 2010, but the American economy is not keeping up. Broad based growth sent the OECD higher in October for the eighth consecutive month, and above its long-term average of 100 to 101.4 in October from 100.4 in September. The October rise was driven by solid gains in Europe as well as milder increases in Asian economies. Economic conditions in the United States also are improving but at a slower pace than most of the other OECD nations. Stronger growth abroad along with a more competitive value of the dollar will continue to propel the recovery in U.S. exports that began in May.
Separately, the Commerce Department reported today that retail sales rose by 1.3 percent in November, slight acceleration from the increase in October. However, 42 percent of last month’s rise was due to increased sales at gasoline stations, which were mainly driven by higher gasoline prices. Outside of purchases at gasoline stations, retail sales rose by only 0.8 percent in November, which was a deceleration from October.
Today’s reports show that while economic momentum is building abroad, the U.S. economy is not keeping pace. The American consumer is reluctant to spend, at least in part because of fears about job security.
While job creation remains a focal point in Washington these days, one of the most effective ways we can do that is to increase exports by approving pending free trade agreements. We know that 95 percent of the world’s consumers are overseas and they have money to spend. In both the near term and long term, an aggressive export campaign is going to be key to job creation.