US Economy Grows 3.5% in Q3: Can They Sustain?

In Financials, Politics on October 29, 2009 at 14:51

Wal MartThe US economy has statistically exited from recession. Its Q3 GDP growth on an annual basis beat analysts estimates and reached 3.5%. Growth had been missing for more than a year. The big issue here is whether this trend can be sustained.

Large part of this expansion was propelled by Washington’s stimulus packages that boosted consumer spending, which accounts for more than 70% of US economy, and home building. What happens when the government’s stimulus runs out of steam? Will the private sector pick up from there?

What’s worrying is that without the government’s “cash-for-clunkers” program which re-fuelled car sales, GDP growth would have been 1.9%. Same holds for residential investment which contributed to GDP for first time since 2005. This freshly released figure doesn’t allow for safe conclusions.

Lagging indicators like unemployment rates and consumer credit haven’t caught up yet with GDP rise. Unemployment will take at least 18 months to reverse its trend to pre-crisis levels. Let’s not get too excited as the road to recovery is still long and upward. For the rates to be sustained transition from government-driven to private-driven growth has to be smooth. And let’s not forget of the China force…

by the Self-Seeker


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