US Economy Recovering–But Not As Much As The Forecast

In the third quarter of 2009, there was a 2.2% growth in the US economy, much lesser than the 2.8% GDP recovery forecast. 

A number of 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 a commercial sector’s weak construction activity. 

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 on its way to recovery.  This growth is the first time in almost a year of consecutive decline since the start of the economic downturn and many are hoping and predicting that the current quarter will realize a higher rate of growth. 

Before the year ends, economists think that a possible growth of 4% will be achieved in the fourth quarter.  This will be reminiscent to the more than 5% growth in the first three months back in 2006. 

Even though the economy is growing, the country’s economy has still a long way to go before it can see a significant progress on the whole economy.  The present unemployment rate is at 10% and may continue to rise.  This may affect economic growth in the US to drastically slow down to just 2-3 percent.

The growth in this year’s last quarter is credited to the reloading of inventories from different companies also in recovery that were reduced since the credit crunch.  As a result, it will encourage the manufacturing industry to churn out more goods and will be a factor for economic recovery.

Other factors that would play a role in future recovery are consumer spending and soar in export sales. 

The recession of 2008 was caused partly by the crisis in the housing industry where mortgages kept piling up until fiscally troubled homeowners were no longer able to sustain them.  This lead hundreds losing their homes and a lot of consumers needed to tighten their resources in which buying a home is no longer an option. 

The auto industry also felt the brunt of the recession where chief car manufacturers such as General Motors came across a major decline in sales forcing them to downsize and appeal to government bailout.  These contributed further to the decline in the country’s economy. 

First-time homebuyers were presented a $8,000 tax credit so that home-sales stayed afloat and the cash for clunkers program helped lots of people obtain cash or new cars in exchange for their old cars and car dealers also benefited from it.  Even though 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 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.