Different Reasons That Will Dictate US Economic Growth Or Decline

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

Several factors are blamed for the slower pace.  These factors include weaker construction in the commercial sector, companies cutting back on inventory supplies, 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 becoming more favorable after months of going downhill.  Since last year’s recession, there has been a continuous economic decline until this year’s third quarter and many economists predict that the last quarter will get a higher percentage growth rate. 

Before the year ends, economists believe that a likely growth of 4% will be realized in the fourth quarter.  This will mirror the economic growth of 5.4% in the first quarter of 2006. 

In spite of all this growth, the economy in the US still has a long way to go before it can be brought back to its former shape.  It is said that the unemployment rate, which is now at 10%, may continue to rise.  This may cause economic growth in the US to significantly slow down to just 2-3 percent.

The October to December growth for this year is credited to recovering companies spending mostly on office equipments and inventory that were reduced since the credit crunch.  As a consequence, it will encourage the manufacturing industry to churn out more commodities and will contribute to the overall boost to the economy.

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

Much of the cause behind last year’s recession was the crisis in the housing sector, where homeowners became incapable of paying their mortgage.  This resulted hundreds losing their homes and a lot of people needed to tighten their budget in which buying a home is no longer an option. 

The recession also affected the auto industry where major car manufacturers such as General Motors suffered enormous plummet in sales forcing them to downsize 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 has also provided plenty 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 will be a substantial aid for a lot of homebuyers and the economy.

There are still uncertainties whether the economy could continue its level of recovery for the next 2-3 years.  Economists say that the government needs to present new stimulus programs in order to boost the spending of consumers, which is considered the means of support of the overall US economic activity.