24
2010
Current State of US Economy and Federal Reserve’s Forecasts for Next Few Years
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The official report stated that the recovery during the summer was a tad bit higher than the earlier estimated 2% as the economy was able to steer at a growth rate of 2.5% during July to September. This number is surely a surprise after seeing a miniscule growth rate of 1.7% in April to June quarter.
However, unemployment rate continued to drag the overall sentiment as it did not move from the sticky area of 9.6%.Moreover, to add to unemployment concerns, the Fed continued its negative take on the employment scenario and suggested that the rate won’t move significantly from the current zone.
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What Contributed in the Upward Growth Surprise?
Surprisingly, the U.S shoppers stood by the economy and showed some renewed confidence while spending. This is surely a sign that stock market will take cues from, but these days things can change quite fast only to disappoint again and again.
Despite good quarterly numbers another concerning thing is that U.S companies are not hiring. This situation did not improve even after post-tax profits rocketed to $1.22 in the last quarter.
Economic Forecasts for Future
The band for unemployment has been projected to stay amid 9.5 to 9.7 percent for the rest of 2010, with the growth rate being around 2.5%. These are certainly lower than the earlier estimates communicated in July. The report further suggested that the growth will remain intact on its upward journey, but it won’t be sufficient to bring any relief from the sticky unemployment. The best estimates from Fed expect the growth to top around 4.5% by the year 2013 and the unemployment to ease down to 8% in next three years.
The general analysts consensus suggests that it wont be possible to bring down the unemployment rate back to its normal zone of 5-6 percent unless the economy grows at a growth rate above 5% for an entire year, which is not going to happen as per Feds economic forecast.
How is the Housing Market Panning Out?
Housing market has not seen any respite as the October numbers have again shown a dip in home sales. Roughly 39% down from 7.25 million sales in the September of 2005 the current sales have fared around 4.43 million homes. In tandem with the dip in home sales the median home sale price has also seen a slight dip to $170,500.Further economists worry that with prevailing unemployment, any considerable increase in consumer spending is unlikely.
Impact on Stock Market
Markets took a note of these economic numbers and forecasts and reacted sharply down, but that fall was mainly triggered due to sudden conflict between North Korea and South Korea and the over extending economic challenges re-emerging in Europe.
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