The U.S. economy and its struggle for sustained growth

Has the USA already gone through the worst? Is the economy about to recover and are banks thus boosting their credit businesses again? This week’s economic figures came up with a 2.0 % growth of the U.S. economy – a fact, which should elate economists. But in reality, they see more problems behind the figure than one could think of…Shortly before the U.S. government is about to inflow a record sum of 2 trillion dollars into its system, I found a Bloomberg report that analyzed the latest U.S. economy growth of 2.0 % in the third quarter (quarter-to-quarter). The report makes clear that it has to be questioned whether this growth is of substantial character. As a Reuters report on consumer spending sentiment says: “consumer spending typically accounts for about two-thirds of U.S. economic activity”. For this third quarter, consumer spending rose again but as the Bloomberg report mentions, final sales are the real indicator for a rise in demand:  “Growth in real final sales to domestic purchasers slowed to 2.5 percent, following a 4.3 percent boost in the second quarter. Final sales of domestic product (adds in net exports) eased to 0.6 percent from 0.9 percent annualized in the second quarter.
Compared to the Bloomberg report, I could find a site from wall street journal where various economists unanimously say the growth rate is not enough and there are no signs for an ongoing growth of 2.0% or more. As Steven Blitz from ITG Investment Research mentions: “households are still too overly indebted and underemployed”, so no larger purchases as cars can be handled. In addition, Guy LeBas says that this time’s rise in consumer spending is “a sale or other form of price cut, which implies a deflationary trend for consumer goods and services”.

The question remains whether we can really see a sustained rise in U.S. consumer spending and if this will then lead to the highly desired recovery of the U.S. economy. As far as I am concerned, I am not convinced of the U.S. Americans starting to spend more in the near future. Thus, also keeping in mind that signs of a recovery would ease tensions among U.S. banks, I think that trust between banks and companies will not improve in the near future.

Not taking the upcoming Christmas sales in account, I think that it will take some months until we will see a sustained growth in U.S. consumer spending. This time, Americans want to pay their debts first and lose their burden till they feel fine enough to invest in larger goods. Even more, it will take some months until the upcoming round of QE results in a healthier state of U.S. companies and thus in more investments. Moreover, as long as unemployment stays at such high levels, consumer spending cannot exceed its current rate to a high extent. Taken all this into consideration, I am afraid that banks will not trust companies much more than before. Thus, a real revival of the credit business is still not in sight.

What do you think? Is U.S. consumer spending really getting stronger again? Will the U.S. economy recover soon and will the credit business thus improve? Or is the fear of a new recession still imminent?


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6 Responses to The U.S. economy and its struggle for sustained growth

  1. rudi2020 says:

    Today (2/11) the FED is meeting for two days in order to discuss further action against a (new) looming (?) recession. However, “money inflow” seems to be the only remedy at hand momentaryly. Some speak of another $500bn to boost economy once again..

  2. stuerzele says:

    This is a very interesting topic and you may be right, that Americans became more cautious and now only want to spend the money they actually have. However, the Financial Times Deutschland published an article today, which states, that some German car manufactueres were able to boost their car sales in Northern America by over 10% in October with the prospect to rise.

  3. Pingback: Keep the money coming – | BraveNewFinance.

  4. bravenewloock says:

    Have a look at this Bloomberg analysis:
    According to it, consumer spending rose less than predicted, albeit the strongest monthly car sales since August 2009. Might the Americans really be on a way to spend only what they have?

  5. Pingback: Watch out for those…! | BraveNewFinance.

  6. Just a quick update on the US GDP growth figures:

    As this post reports, “For all of 2010, the world’s largest economy expanded 2.9 percent, the most in five years, after shrinking 2.6 percent in 2009”.

    In its fourth quarter 2010, the US economy boosted its growth by 3.2 % annual pace, which was mainly “driven by the biggest gain in consumer spending in more than four years and rising exports”.

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