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 movement is blamed at several factors.  Factors such as people not spending much, companies’ inventory cutbacks, office software and equipment received low business investments, and construction in the commercial sector was not strong. 

Even though it seems that the recovery fell short for almost everyone, it is still a sign of hope for a lot of Americans 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 economists predict that the current 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 January to March back in 2006. 

Even if the economy strengthens for the time being, the economy in the US has still a long way to go before it can see a considerable improvement on the whole economy.  The existing unemployment rate is at 10% and may keep on rising.  Economic growth could just be limited between 2-3 percent if this rate is not lowered.

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.  Because of this, factory production will go into overdrive and will contribute to the overall boost to the economy.

A rise in export sale and rise in consumer and corporate spending are also likely to provide a hand on the last quarter growth. 

One key factor that lead to last year’s economic crash was the housing crisis where consumers fell short in paying for their mortgages.  This resulted hundreds losing their homes and a lot of consumers had to spend less on almost everything including buying a home. 

The auto industry also felt the brunt of the recession where chief car manufacturers such as General Motors incurred huge debts and profit losses forcing them to lay-off thousands of workers and ask for 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 afloat 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.  Even though the cash for clunkers program has ended, the tax credit for homebuyers would still go on for the next year 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 offer additional incentive programs in order to boost the spending of consumers, which is considered the means of support of the overall US economic activity.