Growth And Shrink Factor On The Economy
January 3, 2010
The 2.2 percent growth in the third quarter of 2009 has both relieved and disappointed a lot of economists since it signified 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 several causes. Some of these reasons are consumers spending less than ever, 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 appears that the recovery fell short for almost everybody, it is still a breath of fresh air that the economy is on its way to recovery. This growth is the first time in almost a year of consecutive decline since the onset of the economic downturn and many economists predict that the current quarter will get a higher percentage growth rate.
Analysts say that there would almost certainly be a 4% growth in the economy at the end of 2009. This will mirror the economic growth of 5.4% in January to March back in 2006.
In spite of all this growth, the country’s economy still has other problems to overcome before it can see a major improvement on the overall economy. It is said that the unemployment rate, which is now at 10%, may continue to rise. This would certainly affect recovery and may slow next year’s economic growth to just 2%.
The October to December growth for this year is thanked to the reloading of inventories from different companies also in recovery that were reduced since the credit crunch. As a consequence, it will encourage the manufacturing industry to yield more commodities 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.
Much of the cause behind last year’s recession was the crisis in the housing sector, where mortgages kept piling up until fiscally distressed 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 resources wherein buying a home is no longer an alternative.
The auto industry also felt the burden of the recession where chief car manufacturers such as General Motors experienced 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.
The US government offered as of late first-time homebuyers an $8,000 tax credit. Because of this, home-sales stayed buoyant and the cash for clunkers program benefited both consumers and car dealers. Even though the cash for clunkers program has ended, the tax credit for homebuyers is still in effect and will be a big aid for a lot of homebuyers and the economy.
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 put forward additional incentive 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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