Is the U.S. Economy on Its Way to Recovery?

During the last few months, the United States GDP has been falling rapidly. What is behind this slump and how long may it take for the economy to recover?

Indeed, several economic indicators are showing that the world’s largest economy is in a very bad condition. For example, the Institute for Supply Management's factory index was at 36.3 in March. A reading less than 50 signals a contraction and the measure has been below that level since February 2008. Moreover, earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, fell by $250.3 billion from the third quarter, the biggest decrease since records began in 1947. To make things even worst, the economy has lost more than 1.2 million jobs so far this year and consumers and companies keep on cutting on expenses.

However, at Trading Economics we think the worst may be over for the U.S. economy and we expect to see some recovery in the second part of 2009. In fact, tax provisions and transfers for state and local governments are likely to boost the economy in the short run and investments in infrastructure, renewable energy, health care and technology for sure will have a positive effect in the long run. Also, sooner or later, the U.S. Treasury and the Federal Reserve programs aimed at expanding purchases of mortgage-related securities and buying longer-term Treasury securities should help financial institutions and reduce interest costs.

Anna Fedec,
4/8/2009 4:39:57 PM