Japan, housing starts and Argentina bounce back

The latest news (Feb.17) from Argentina is very positive. Exports have jumped to a record high and surprise surprise a surge in government spending has increased domestic demand. According to Bloomberg News Argentina the second biggest Latin American economy after Brazil has now expanded more than 8 % for the past three consecutive years. The latest growth rate is a whopping 9.1 %. None of this, of course comes from following the austerity obsessive IMF road. Instead Argentina has followed a more Keynesian path back on the road to economic health. Initially freezing its repayment on loans then devaluing by as much as 67 % and then repaying a chunk of its loans withion the limits of affordability. The result a hopefully brighter future for Argentina.

Japan, another country that had been trapped in a slump because of the stock market bubble bursting in the 1990s and excessive oversaving has just reported a surge of 5.5 % in the fourth quarter Both consumer spending and exports are up, particularly to China.

Japan which ranks number 2 in the world after the US in terms of economic size on a country basis, is a bright light on the horizon in comparison to sluggish Europe and possibly faltering America. Overall growth for the year 2005 was a respectable 2.8 %. The EU grew only 1.3 % in 2005 while the US grew 1.1 % according to the New York Times.Consumption was growing up 0.8% and employment prospects improving.

The news in the US is mixed but the latest housing starts data is positive. Home construction in January jumped 14.5 % a 33 year high according to the US Commerce Dept.(The new York Times, Feb,17, 2006) Unfortunately one has to be a bit cautious about the data because it is based on a sample survey with a high error factor 9.9 % points plus or minus. But if it continues despite the tightening by the Fed that is a sign the economic recovery is still sustainable unless the Fed chokes it off. Housing like autos is a bedrock part of the economy because of very diverse and widespread backward linkages that provide the materials that go into the construction , finishing and furnishing of the house.Houses add to the capital stock and provide homes for families who then go on to produce additional economic value over many years plus inestimable health and well being for millions.