v8rider.net

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.  These factors include consumers spending less than ever, companies’ inventory cutbacks, decline in company spending in terms of inventory and supplies, and a commercial sector’s weak construction activity. 

Even though it appears that the recovery fell short for almost everyone, it is still a breath of fresh air that the economy is showing signs of growth.  This growth is the first time in almost a year of consecutive decline since the start of the economic downturn and a lot of experts have their hopes up that the current quarter will have a higher growth percentage. 

Before the year ends, economists believe that a possible growth of 4% will be realized in the fourth quarter.  This will be reminiscent to the more than 5% growth in the first quarter of 2006. 

In spite of all this growth, the country’s economy has still more hurdles to overcome before it can be out of the woods.  It is thought that the unemployment rate, which is now at 10%, may keep on rising.  This would indeed 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 thanked to recovering companies spending mainly on office equipments and inventory that were reduced since the credit crunch.  As a consequence, it will encourage the manufacturing industry to create 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 source behind last year’s recession was the crisis in the housing sector, where mortgages kept piling up until financially distressed homeowners were no longer able to sustain them.  This resulted not just to people losing their houses but a lot of consumers had to expend less on practically everything including buying a home. 

The auto industry also felt the brunt of the recession where chief car manufacturers such as General Motors suffered colossal plunge in sales forcing them to lay-off thousands of workers and ask for government bailout.  These contributed further 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 buoyant and the cash for clunkers program has also provided lots of car dealers new ways to sustain their sales income.  Even though the cash for clunkers program has ended, the tax credit for homebuyers is still in effect and is expected to play a role in the continued economic recovery.

There are still uncertainties whether the economy could maintain its level of recovery for the next 2-3 years.  Economists say that the government needs to offer more incentive programs in order to encourage consumer spending, which is considered the lifeblood of the overall US economic activity.