Growth And Shrink Factor On The Economy
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.
Several factors are blamed for the slower pace. Some of these reasons are consumers spending less than ever, companies’ inventory cutbacks, office software and equipment received low business investments, and construction in the commercial sector was not strong.
In spite of the lower rate of growth in the economy, it is still good to know that the economy is becoming more favorable after months of going downhill. After months of decline, it was only from July-September 2009 where growth in the economy occurred and many economists predict that the last quarter will get a higher growth percentage.
Analysts say that there would almost certainly be a 4% growth in the economy at the end of 2009. This will be reminiscent to the more than 5% growth in the first three months back in 2006.
In spite of all this growth, the economy in the US still has to overcome existing challenges before it can be out of the woods. The existing unemployment rate is at 10% and may continue to rise. This would surely have an impact on the recovery and may slow next year’s economic growth to just 2%.
The growth in this year’s last quarter is thanked to the replenishment of inventories from different companies also in recovery that was dramatically used up during and after the economic slump. As a consequence, it will encourage the manufacturing industry to manufacture more supplies and will be a contributing factor to economic growth.
Other factors that would play a role in future recovery are consumer spending and increase in export sales.
Much of the root behind last year’s recession was the crisis in the housing sector, where consumers fell short in paying for their mortgages. This resulted hundreds losing their homes and a lot of people needed to tighten their budget in which buying a house is no longer an option.
Car industries have also been struck hard where chief car manufacturers such as General Motors suffered colossal plunge 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 offered by the government to first-time home buyers, home-sales stayed floating and the cash for clunkers program helped lots of individuals acquire cash or new cars by swapping their old cars and car dealers also benefited from it. Although the cash for clunkers program has ended, the tax credit for homebuyers is still in effect and will be an encouragement for homebuyers and the housing market.
There are still skepticisms whether the economy could maintain its level of recovery for the next 2-3 years. Economists say that the government needs to put forward new stimulus programs in order to for consumer spending to be on the move once more, which is considered the lifeblood of the overall US economic activity.
