How will the US Economy Shape Up in the Ongoing Global Recovery? Is the Recovery Process Self-Sustainable?

So far, the global recovery has been slow but it has lasted amid tremendous pessimism. It’s been more than two years of doubt and uncertainty about global growth, but things keep turning back in its favor after every volatile jolt. Unemployment situation in developed markets is a bit dicey, but developing markets are providing signals that the recovery process is still continuing. Globally, all eyes are on how the US economy will shape up after proactive intervention of the Federal Reserve all these years?

US Economy in Second Half of 2011 and Beyond

The first half of 2011 has been good for the US, despite a jittery political environment around the globe and rising commodity prices breaking the back of consumers. Till the start of the second half and the recent meltdown in stock markets it appeared that the recovery process was maturing and shaping up as self suitable, but again mass mentality is shifting towards the worst case scenario. Some calling it a double-dip, some even more bearish crying out that it’s a Depression cycle. Everyone has a theory and a relevant reasoning to justify his stance, but one thing is clearly visible that bullish voices are taking the back seat and very few are showing enthusiasm.

Labor market in US was showing some positive activity in the first half, but most recent data suggests that those green shoots were short lived, and it seems that it’s really hard to keep the unemployment rate in single digits for long.  If you go by economists’ view, growth in US will remain in the range of two to three percent for several more quarters, maybe few years more. But those who have seen the 2008 crisis unfold would not give in much to these estimates as they have a clearer idea of how things can turn these days. They surely don’t turn for good that fast.

The Global Economic Recovery is not Self-Sustaining

This is not a self-sustaining recovery and we will continue to see high activity from central banks around the world as the recovery continues to unfold. Some are already blaming US Federal Reserve for worsening the situation; most developing countries are facing high inflation rates due to Federal pumping in monetary system. Raising debt ceiling in the US is another dramatic act after two huge rounds of quantitative easing, and analysts are unanimously betting against it. But that’s not the end to the story, Federal Reserve may be preparing yet another plan for one more round of QE, and its too early to predict how investors will react to any such announcement.

Global Growth: Developing and Developed Markets’ Growth Contrast

If we again shift our focus towards global growth, things might appear better than those in US and Europe. It is expected that the global economy will easily grow above 3.5% for next two years, though the slow pace can be mainly blamed on uncertainties engulfing developed markets. Growth in fast developing countries will remain robust at an expected average of around 7% till 2013.

Also Read:- Is Indian Growth Story still Intact?

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