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By Jason Stipp and Robert Johnson, CFA | 11-07-2012 12:00 PM

Can the U.S. Recovery Stay Ahead of the Pack?

The U.S. economy has surged ahead of other major markets since 2009, but investors can't ignore the potential risk factors of a collapse elsewhere, says Morningstar's Bob Johnson.

Jason Stipp: I am Jason Stipp for Morningstar. While the U.S. has managed a slow but steady growth rate through our recovery from the 2008 recession, the rest of the world has been moderating or shown downright weakness in their economies. How long might this decoupling persist and what's behind it? We're checking in today with Morningstar's Bob Johnson, our director of economic analysis.

Thanks for being here. Bob.

Bob Johnson: Great to be here.

Stipp: The first question, what's some of the evidence that you've collected and that caused you to really feel like we are seeing a decoupling in the U.S. versus some of the other economies in the world? What are some of the facts behind that?

Johnson: Sure. I think one of the key things to look at, even as very recently, we've kind of gone from a 1.3% GDP growth rate to something that looks much more like 2% here in the U.S. So, we're kind of picking up in terms of our growth percentage. And if you look at it even on a year-over-year basis, we've been really, really very steady at kind of 2% level.

Meanwhile, Europe has gone the other way, and I'd say they are probably in a recession. We are going to have a quarter here where everybody over there is negative. So, they'll actually be having shrinking economies over there at the same time the U.S. economy is not only growing, but growing faster than before.

Stipp: In Asia, we know that they're still having much stronger growth rates than we're seeing in the U.S., but the trend isn't a positive trend like we're seeing here?

Johnson: Yeah. There we might have been growing 10% a few years ago, then it was 8%, now it's 7%, and I bet by the time we get done with all of this, it will be 5%. And Brazil and some of the South American countries are kind of the same kind of slowing thing while we certainly appear to be moving ahead.

Stipp: So there has been a broad theme for a while of globalization, that we're living in a global economy, that we are more connected now than ever before. So what are some of the reasons then in this particular environment that we are able to move ahead at a slow but steady pace while some of the other parts of the world are struggling?

Johnson: We're a little bit less export-dependent than most of other countries. I mean it has gone up; it's kind of gone from even 20 years ago, 9%, 10% to something looks like 13% 14% today. So, exports are a bigger part of our economy, but lo and behold, most of those turn out to be to Canada or to Mexico. Our exports to Europe are small. It's about 3% of GDP, in China even less at 1% of GDP.

So, it is a much more export-oriented world, but we're nowhere like where Germany is, where the numbers are in the mid-30s in terms of exports and probably similar number for China--their number gets little dicier because of the raw materials they import and then re-export. But most countries run a much higher percentage of exports than we do. We'd like to do more probably, but right now, it is what is at 13%, 14%.

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