Indeed, there are more and more good news coming for the US economy and it is expected that growth may reach as much as 3% in the second half of 2009. In fact, in September industrial production recorded the third consecutive monthly increase and inventories continued to shrink. Moreover, retails sales has grown in August and September even excluding vehicle sales. More importantly, it seems the housing market, probably the biggest cause for the recent financial crisis, has reached the bottom and housing starts and existing home sales have bounced higher.
However, the economy recorded more job losses in September than in August and unemployment rate reached 9.8%, the highest since 1983. Evidently, without growth in employment, households can’t generate income and create demand which is necessary in elevating production levels. In addition, the biggest fiscal deficit on record combined with the anticipation of low interest rates for a long time is discouraging investors from leaving money in the United States and driving down the value of the dollar. This week, US dollar slipped beyond $1.50 per Euro for first time in 14 months. And although a weak dollar has a positive effect on exports, imports prices are also rising bringing the danger of stagflation.