Recovery Of The US Economy
Friday, January 1st, 2010The 2.2 percent growth in the third quarter of 2009 has both relieved and disappointed a lot of economists seeing as it indicated that the economy is showing signals of growth, yet the forecasted 2.8 percent growth wasn’t met.
Despite the fact that the 2.2% recovery is seen as a blessing, there are still few factors being blamed for the slow rate of growth. Factors such as poor consumer spending, companies cutting back on inventory supplies, office software and equipment received low business investments, and construction in the commercial sector was not strong.
Even though it looks as if that the recovery fell short for almost everyone, it is still a sign of hope for a lot of Americans 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 current quarter will realize a higher percentage growth rate.
At the start of 2010, experts are saying that the overall growth for the last quarter of 2009 will be at 4 percent. This will mirror the economic growth of 5.4% in the first three months back in 2006.
Even though the economy is growing, the country’s economy still has to overcome existing challenges before it can see a considerable recovery on the whole economy. At 10%, the rate of unemployment may continue to rise. This would definitely influence recovery and may slow next year’s economic growth to just 2%.
The growth in this year’s last quarter is credited to recovering companies spending principally on office supplies and inventory that were reduced since the credit crunch. Thanks to such improvement, factory production will go into overdrive and will be a factor for economic recovery.
A rise in export sale and rise in consumer and corporate spending are also expected to provide a hand on the last quarter growth.
One major factor that lead to last year’s economic plunge was the housing crisis where mortgages kept piling up until financially troubled homeowners were no longer able to sustain them. This resulted not just to people losing their houses but a lot of people needed to tighten their budget wherein buying a home is no longer an alternative.
The recession also affected the auto industry where major car manufacturers such as General Motors came across a major decline in sales forcing them to lay-off thousands of workers and appeal to government bailout. These further contributed to the decline in the country’s economy.
Thanks to the $8,000 tax credit offered by the government to first-time home buyers, home-sales stayed floating and the cash for clunkers program benefited both consumers and car dealers. Although the cash for clunkers program is no longer ongoing, the tax credit for homebuyers would still go on for the next year and is expected to play a role in the continued economic recovery.
There are still doubts whether the economy could keep up its level of recovery for the next 2-3 years. Economists say that the government needs to present new stimulus programs in order to encourage consumer spending, which is considered the means of support of the overall US economic activity.
