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 failed to come across the 2.8 percent expectation.
The slower growth pace is blamed at numerous factors. These factors include poor consumer spending, low investment on equipments and software, office software and equipment received low business investments, and a commercial sector’s weak construction activity.
Even though it appears that the recovery fell short for almost everyone, it is still a sign of hope for a lot of Americans that the economy is on its way to recovery. Ever since last year’s recession, there has been a nonstop economic decline until this year’s third quarter and many economists predict that the current quarter will realize a higher growth percentage.
Analysts say that there would probably be a 4% growth in the economy at the end of 2009. This will mirror the economic growth of 5.4% in the first quarter of 2006.
Even though the economy is growing, the economy in the US still has other obstacles to overcome before it can be out of the woods. It is said that the unemployment rate, which is now at 10%, may go on rising. This may cause economic growth in the US to significantly slow down to just 2-3 percent.
This year’s final quarter growth is credited to recovering companies spending mostly on office supplies and inventory that were reduced since the credit crunch. As a result, it will encourage the manufacturing industry to generate more commodities and will be a factor for economic recovery.
An increase in business and consumer spending as well as rising export will also boost the economy in the long run.
The recession of 2008 was caused to some extent by the crisis in the housing industry where consumers fell short in paying for their mortgages. This lead to homeowners not just losing their homes but a lot of people had to spend less on almost everything including buying a home.
The recession also affected the auto industry where chief car manufacturers such as General Motors incurred huge debts and profit losses forcing them to downsize and ask for government bailout. These further contributed to the decline in the country’s economy.
The US government recently offered first-time homebuyers an $8,000 tax credit. Because of this, home-sales stayed buoyant and the cash for clunkers program has also provided plenty of car dealers new ways to sustain their sales income. Even though the cash for clunkers program ended in August, the tax credit for homebuyers would still go on for the next year and will be a big aid for a lot of homebuyers and the economy.
There are still uncertainties whether the economy could keep up its level of recovery for the next 2-3 years. Economists say that the government needs to offer additional incentive programs in order to promote consumer spending, which is considered the means of support of the overall US economic activity.
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