U.S. Markets Weekly – March 21 – March 25, 2011

Posted March 25, 2011 by CLeahey

[private][private]The ongoing catastrophe in Japan has emerged as a risk factor for the U.S. economic expansion, but likely not necessarily a major risk. Even though Japan ranks as one of the U.S.’s major trading partners, it only absorbs 4.7% of our exports. As exports make up 14% of U.S. GDP, even a 10% drop in exports to Japan due to the crisis – by itself – will shave less than 0.1 percentage points off of GDP growth forecasts this year. Global trade linkages between Japan and the rest of Asia, and between the rest of Asia and the U.S. could magnify the effects somewhat. But it’s also possible that the impact on Japan’s imports might not be as severe as the impact on its GDP. The earthquake and ongoing nuclear crisis may have reduced Japan’s productive capacity more than its aggregate demand for goods and services. If this is the case, the country may need to satisfy more of its consumption needs out of imports.

DE-USMW-3-25-11[/private][/private]