Different Reasons That Will Dictate US Economic Growth Or Decline

The US economy showed signs of recovery in this year’s third quarter where 2.2 percent growth rate was met but failed to meet the 2.8 percent expectation. 

Despite the fact that the 2.2% recovery is seen as a blessing, there are still few factors being blamed for the slow rate of growth.  These factors include people not spending much, companies cutting back on inventory supplies, office software and equipment received low business investments, and a commercial sector’s weak construction activity. 

Even with the decelerated growth speed, it is still good to know that the economy is showing signs of growth.  Since last year’s recession, there has been a nonstop economic decline until this year’s third quarter and many economists predict that the current quarter will get 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 be reminiscent to the more than 5% growth in the first three months back in 2006. 

Even if the economy grows for the time being, the US economy has still a long way to go before it can be brought back to its previous shape.  It is said that the unemployment rate, which is currently at 10%, 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 the replenishment of inventories from different companies also in recovery that was dramatically exhausted during and after the economic slump.  Because of this, factory production will go into overdrive and will play a part to the overall boost to the economy.

An increase in business and consumer spending as well as rising export will also boost the economy in the long run. 

Much of the root behind last year’s recession was the crisis in the housing sector, where consumers fell short in paying for their mortgages.  This resulted hundreds losing their homes and a lot of people needed to tighten their resources wherein buying a home is no longer an alternative. 

The recession also affected the auto industry where major 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 further contributed to the decline in the country’s economy. 

First-time homebuyers were presented a $8,000 tax credit so that home-sales stayed floating and the cash for clunkers program helped lots of individuals obtain cash or new cars in exchange for their old cars and car dealers also benefited from it.  Although the cash for clunkers program has ended, the tax credit for homebuyers would still go on for the next year and will be a substantial support for a lot of homebuyers and the economy.

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 present more incentive programs in order to promote consumer spending, which is considered the lifeblood of the overall US economic activity.

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