US economy fraught with weaknesses

The US economy is currently one of the strongest in the world, among developed nations. However, economists are warning that it may be losing steam. They point to such statistics as consumer confidence and retail sales data, which are increasing, but at a slower-than-expected pace. This trend will likely continue in the short-term for a few reasons. First, as fuel costs creep ever-higher, Americans will have less disposable income to spend on non-durable goods. Next, with rising interest rates, leveraged companies and individuals with adjustable-rate mortgages will witness a rise in the cost of paying back loans. Finally, as the USD depreciates, so do the costs of imports rise. This spells trouble for the US, which is running a record trade deficit. Analysts are watching this situation closely, as American consumers, in part, drive the global economy. With many developed economies stagnating (Japan, Europe et al), American consumers will continue to play an important role. BMO Nesbitt Burns reports:

Contributing to this concern is the still relatively tepid U.S. job market. Business investment likely continues strong, but corporate earnings growth is slowing as the cost of production rises. Trouble spots are everywhere: Think airlines, autos, GSEs, housing, and sub-prime loans.

Read More: The Risks of a U.S. 'Soft Spot'