This article examines the current situation of U.S. economy. Although the U.S. economy grew at its fastest pace in 18 months in the fourth quarter, the author points out that slower growth is likely to happen in the coming month due to a weak demand.
The U.S gross domestic product grew at an annual rate of 2.8% in the fourth quarter last year. But the acceleration is less the 3% a year, not enough to bring down the unemployment rate as indicated by economists.
The author also points out that the boosted in spending at the end of 2011 is in part by drawing down savings. This is unlikely to last very long. Economist Mr. Campagna said:"Everyone is just scared to overspend." Without enough consumers willing to buy services and products, a market-economy system like U.S. will suffer from low consumption and firms are not motivated to produce more product and services and the economy will only recover very slowly.
3 comments:
Yes I agree, consumer confidence has been extremely low and even though consumers are spending, its very little relative to the record low interest rates. However, they arent saving either because rates are so low. IT will be interesting to see how saving and spending habits change over the next two years.
I agree with some of the things in this article. It was disheartening that out GDP was only 2.8, which was below expectations and also caused some drops in stocks that day. I do believe that there is a very high savings rate in the US now. Firms and people have money--it's out there. The trick is how are we going to get everyone to start spending. It is not easy, the fed is doing what it can via interest/savings rates etc. but what I believe is that it is going to take some serious time to get comfortable spending again--I think it is going to take longer that people are expecting.
It is true that consumer confidence plays an important role in economic growth. Therefore, to a certain degree, how to improve consumer’s confidence is a question that lies before the question of how to improve economic growth. As indicated in the article, although the current growth rate is at its fastest peace in 18 months in the fourth quarter, the prediction for the market near future is not optimistic because the consumer is still not confident about the economy. In other words, the market needs a stimulus/policy to improve consumers’ confidence of the economy.
Post a Comment