US Economy Recovering–But Not As Much As The Forecast
The US economy showed signs of recovery in this year’s third quarter where 2.2 percent growth rate was met but was unsuccessful to come across the 2.8 percent expectation.
Some factors are blamed for the slower pace. These factors include weaker construction in the commercial sector, companies cutting back on inventory supplies, office software and equipment received low business investments, and a commercial sector’s weak construction activity.
In spite of the lower rate of growth in the economy, it is still a breath of fresh air that the economy is showing signs of growth. Following months of decline, it was only from July-September 2009 where growth in the economy occurred and many are hoping and predicting that the last quarter will get a higher rate of growth.
Before the year ends, economists think that a potential growth of 4% will be realized in the fourth quarter. This will be reminiscent to the more than 5% growth in January to March back in 2006.
Even if the economy grows for the time being, the country’s economy has still other hurdles to overcome before it can see a significant improvement on the whole economy. At 10%, the rate of unemployment may go on rising. This may affect economic growth in the US to significantly slow down to just 2-3 percent.
The growth in this year’s last quarter is thanked to recovering companies spending mostly on office supplies and inventory that was dramatically used up during and after the economic downturn. As a result, factory production will go into overdrive and will be a factor for economic recovery.
Other factors that would play a role in future recovery are consumer spending and increase in export sales.
Much of the cause behind last year’s recession was the crisis in the housing sector, where consumers fell short in paying for their mortgages. This lead not just to people losing their houses but a lot of consumers needed to tighten their resources wherein buying a house is no longer an option.
Car industries have also been hit hard where major car manufacturers such as General Motors came across a major decline in sales forcing them to downsize and appeal to government bailout. These contributed further to the decline in the country’s economy.
Thanks to the $8,000 tax credit presented by the government to first-time home buyers, home-sales stayed floating and the cash for clunkers program helped lots of people obtain cash or new cars in exchange for their old cars and car dealers also benefited from it. Even though the cash for clunkers program has ended, the tax credit for homebuyers is still in effect and is expected to play a role in the continued economic recovery.
There are still doubts whether the economy could continue its level of recovery for the next 2-3 years. Economists say that the government needs to put forward more stimulus programs in order to boost the spending of consumers, which is considered the lifeblood of the overall US economic activity.
This entry was posted on Monday, March 28th, 2011 at 8:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.