El-Erian: US economy can grow despite China brake

USA may continue to grow despite growing concerns about the Chinese economy, according to Mohamed El-Erian.

“It’s about global economic growth and how much of the burden the United States can continue to bear, because China is now an obstacle to growth. overall growthhe said on Friday el-erianchief economic adviser to Allianz SE and columnist for Bloomberg Opinionon Bloomberg TV.

“USA it has the privilege of being a large, relatively closed, well diversified and entrepreneurial economy. so yeah we could” maintain solidity, he noted.

“That’s been the story this year: America has held up well and is picking up speed even though the rest of the world has been slow.”, he added.

Recent reports have indicated that the US economy remains strong. Retail sales rose more than expected in July, with readings for prior months revised up. Some analysts argue that such strength could cause economic growth to accelerate in the third quarter.

Gross domestic product is expected to rise 1.8% annualized this quarter, easily dwarfing the 0.5% pace projected in July, according to Bloomberg’s latest monthly survey of economists, who also estimate the economy will expand by some measured in the last three months of the year, instead of contracting.

On the other hand, recent data from China points to weak consumer spending, a contraction in exports and a worsening slump in the property sector. The People’s Bank of China responded with the sharpest cut in three years to a key interest rate.

This month, President Joe Biden called the economic woes of China like a “time bomb”.

However, US stocks have sold off amid concerns over China’s prospects and fears that the Federal Reserve may keep interest rates high for longer.

The S&P 500 index is heading to post its worst weekly performance since March, while 10-year Treasury yields hit multi-year highs.

El-Erian says that the market has exaggerated “romance with soft landing speech. He went too far, both on the bond side and on the stock side. So I see this as a return to a month of excessive romance with the soft landing.”.