Recession ends in the US

Thursday, October 29, 2009 Recession ends in the US

by Biodun Iginla, BBC News

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Page last updated at 15:08 GMT, Thursday, 29 October 2009
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US economy is growing once again
US GDP

The US economy grew at an annual pace of 3.5% between July and September, its first expansion in more than a year.

The growth was helped by a substantial government spending plan, including a scrappage scheme to boost car sales.

The official figures indicate recession has ended, but some economists think there could be further setbacks.

The White House said it was "a welcome milestone", but stressed it would be some time before the economy made a full recovery.

Compared with the previous three months, the US economy grew by 0.9%. In the same period, and on the same measure, the UK economy unexpectedly stayed in recession after it shrank by 0.4%.

Japan, China, Germany and France have recently climbed out of recession.


ANALYSIS
Michelle Fleury
By Michelle Fleury, New York business reporter

The US, the world's economic powerhouse, joins Japan, China, Germany and France as the leading economies that have emerged from recession.

While economists may be celebrating, it is too soon for the rest of us. The recent weakness of the dollar won't help Americans buy goods from the rest of the world and with the unemployment rate in the US currently at 9.8%, life is still very hard.

Government schemes such as the "cash for clunkers" programme helped consumers and manufacturers but given the weakness of the last retail sales data, shoppers are still limiting their spending.

All the same, this GDP reading is a milestone regardless of how fragile the recovery is.
Pain continues for some
Mardell: Where only hope is left
Head to head: What next for US economy?

Global good news

BBC chief economics correspondent Hugh Pym said the 3.5% annualised growth rate was better than had been expected by most commentators.

"The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK," he said.

It is the first time US economy has last expanded since the second quarter of 2008, when it grew at an annual pace of 2.4%.

US Treasury Secretary Timothy Geithner stressed times were still hard for millions.

"Unemployment remains unacceptably high for every person out of work, for every family facing foreclosure, for every small business facing a credit crunch, the recession remains alive and acute," he said.

Official confirmation of whether the US is in or out of recession will come from the National Bureau of Economic Research, the agency which considers a number of factors in coming to its decision.

Numerous boosts

The figures from the Commerce Department showed that a number of factors helped to lift the economy during the third quarter.

Spending on durable manufactured products soared at an annualised rate of 22.3%, the highest quarterly amount since 2001, led primarily by the impact of the cash for clunkers scheme lifting car sales.

The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years.

Analysts said this big leap was sparked by the government's $8,000 tax credit for first-time house buyers.

Meanwhile, total government spending was up 7.9%, as the wider stimulus spending continued to take effect.

In addition, exports were also up strongly, increasing 21.4%, the biggest rise since 1996.

'Distorted by stimulus'

"It's good to have the economy growing again," said Brian Bethune, economist at IHS Global Insight.

Comparison GDP figures

"But we don't think that rate of growth is sustainable because it is distorted by all the government stimulus.

"The challenge here is to get organic growth - growth that isn't helped by fiscal steroids."

Analysts cautious about the slow nature of the US economic recovery point to the fact that the unemployment rate currently stands at 9.8%, and that the labour market traditionally lags behind any wider economic recovery.

They also highlight the fact that the big car firms have already reported a sharp fall in September sales following the conclusion of the popular $3bn cash for clunkers scheme at the end of August.

"You can say that the recession is over, but it sure won't feel like that," said Dean BakerDean Baker, co-director of the Centre for Economic Policy Research.

"There is a lot of downward momentum that isn't going to go."


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* News feeds Posted by BiodunIginla at 3:31 PM Labels: bbc news biodun iginla, US recession 0 comments:

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