Different Reasons That Will Dictate US Economic Growth Or Decline
The 2.2 percent growth in the third quarter of 2009 has both relieved and disappointed a lot of economists given that it indicated that the economy is showing signals of growth, yet the forecasted 2.8 percent growth wasn’t met.
The slower growth movement is blamed at several causes. Factors such as poor consumer spending, companies’ inventory cutbacks, decline in company spending in terms of inventory and supplies, and a commercial sector’s weak construction activity.
Despite the decelerated growth speed, it is still a breath of fresh air that the economy is becoming more favorable after months of going downhill. This growth is the first time in almost a year of consecutive decline since the onset of the recession and many are hoping and predicting that the current quarter will have a higher growth percentage.
Before the year ends, economists believe that a likely growth of 4% will be achieved in the fourth quarter. This will be reminiscent to the more than 5% growth in January to March back in 2006.
Even though the economy is growing, the US economy has still a long way to go before it can be out of the woods. It is thought that the unemployment rate, which is now at 10%, may go on rising. This would certainly affect recovery and may slow next year’s economic growth to just 2%.
The October to December growth for this year is thanked to recovering companies spending mainly on office supplies and inventory that were reduced since the credit crunch. Because of this, manufacturers will double their production and will play a part to the overall boost to the economy.
An increase in business and consumer spending as well as rising export will also boost the economy in the long run.
One major factor that lead to last year’s economic plunge was the housing crisis where homeowners became incapable of paying their mortgage. This lead to homeowners not just losing their homes but a lot of people also closed their wallets in buying a house.
The auto industry also felt the brunt of the recession where chief car manufacturers such as General Motors incurred deficits and profit losses forcing them to downsize and appeal to government bailout. These further contributed to the decline in the country’s economy.
First-time homebuyers were offered a $8,000 tax credit so that home-sales stayed floating and the cash for clunkers program benefited both consumers and car dealers. Even though the cash for clunkers program is no longer ongoing, the tax credit for homebuyers is still in effect and will be an encouragement for homebuyers and the housing market.
There are still uncertainties whether the economy could maintain its level of recovery for the next 2-3 years. Economists say that the government needs to offer additional stimulus programs in order to for consumer expenditure to be on the move once more, which is considered the lifeblood of the overall US economic activity.
