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A brighter economic outlook is giving Fed confidence to act

By Paul Wiseman

Associated Press

WASHINGTON — In the United States and around the world, economic strength isn’t what it used to be. But everything is relative.

The Federal Reserve is set to raise short-term interest rates today for the third time in six months — a vote of confidence in the American economy and especially in the resilience of the U.S. job market.

Across the Atlantic, the European Central Bank is edging toward ending extraordinary steps to speed growth in the 19 countries that use the euro, a sign that an agonizing era of stagnation may be nearing an end.

And international agencies have lately issued upbeat reports on the global picture after persistent weakness in the years since the Great Recession.

Yet neither the U.S. nor the world economy is likely to regain the robust health that prevailed before the recession struck a decade ago.

“We certainly would expect slower growth than we had in the mid-2000s,” says Sara Johnson, senior research director for IHS Markit.

The IMF foresees the global economy growing 3.5 percent this year — up from 3.1 percent in 2016 but well below the 4 to 5 percent growth typical of the mid-2000s.

A big problem is that the richest countries can’t count on steadily growing workforces to drive expansion because their populations are aging. And across the globe, for reasons that largely confound economists, countries are struggling to generate the acceleration of worker productivity that normally underpins prosperity.

Still, for now, the outlook is at least encouraging.

Unemployment in the eurozone reached an eight-year low in April. China has managed to keep growth expanding at a solid if slower pace, so far defying those who had warned that the world’s second-biggest economy was headed for a hard fall. China is a leading consumer of the world’s natural resources. Its resilience helps explain why prices for commodities — from oil to copper — have stabilized after tumbling from 2014-2016 and slowing global growth.

In the United States, factories have expanded for nine straight months, rebounding from a slump caused by cuts in the energy industry and by a strong dollar, which made American goods costlier overseas. The stock market is surging on stronger corporate profits, brightening economic forecasts and hopes that President Donald Trump and the Republican Congress will cut taxes and regulations.

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