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 since it suggested that the economy is showing signs of growth, yet the forecasted 2.8 percent growth wasn’t met.
The slower growth pace is blamed at numerous causes. Some of these reasons are people not spending much, companies cutting back on inventory supplies, decline in company spending in terms of inventory and supplies, and a commercial sector’s weak construction activity.
Despite the slow growth pace, it is still a breath of fresh air 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 last quarter will realize a higher growth percentage.
At the start of 2010, experts are saying that the inclusive 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.
In spite of all this growth, the economy in the US has still a long way to go before it can be restored to its previous state. At 10%, the rate of unemployment may go on rising. This would surely have an impact on the recovery and may slow next year’s economic growth to just 2%.
The October to December growth for this year is credited to different companies resupplying their inventories that were reduced since the credit crunch. Thanks to such recovery, manufacturers will double their production and will be a contributing factor to economic growth.
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 partly by the crisis in the housing industry where mortgages kept piling up until financially troubled homeowners were no longer able to sustain them. This resulted to homeowners not just losing their homes but a lot of people needed to tighten their resources wherein buying a home is no longer an option.
The auto industry also felt the burden of the recession where chief car manufacturers such as General Motors suffered huge plummet in sales 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 floating and the cash for clunkers program has also provided plenty of car dealers new ways to sustain their sales revenue. Although the cash for clunkers program ended in August, 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 retain its level of recovery for the next 2-3 years. Economists say that the government needs to offer additional stimulus programs in order to boost the spending of consumers, which is considered the means of support of the overall US economic activity.
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