Although, the economy of the US considers the world’s largest economy yet it does not escape from financial crisis, which occurred in 2008 so that it may currently facing economic recession. Overall, the U.S economy is facing low GDP rates, high unemployment rates, high inflation rates, and lowers consumer-buying powers. Moreover, the companies are cutting their investments as well as consumers are decreasing their spending because of recession in the U.S economy. However, in the first quarter of 2013, the GDP (Gross Domestic Product) gone negative up to -0.8%. On the other hand, the GDP improved in the second quarter of the 2013, as it had gone positive up to 2%. Currently, in the third quarter of 2013, the GDP of the U.S economy has improved over both first and second quarter of 2013. Likewise, the GPD has grown up to 2.8% in the third quarter of 2013, which shows a positive increase in GDP, conversely, this increased GDP is considering the highest GDP of the U.S economy in 2013. Although, the increase in the U.S GDP looks positive, yet it has increased due to onetime stocking of inventories by the businesses operating in the U.S.
For instance, less demand by the U.S consumers for the companies has caused largely an increase in the GDP U.S rate. However, if we strip out this GDP growth, which occurs due to stocking of the inventories by the companies, then the increase, which has come in the third quarter of the 2013, is far less than the GDP rate in the second quarter of the 2013. Likewise, after eliminating the growth rate, which has come from inventories, would become 2% over 2.1% in the second quarter of the 2013. Overall, businesses of the U.S are cutting their investments on software as well as equipment industry in the third quarter of the 2013. Overall, the recovery from the financial crisis has been stacking in the GDP growth rates such as 2% for the last four years.
CURRENT PROBLEMS OF THE USA ECONOMY
Currently, the U.S economy is facing a number of economic problems including high unemployment rates, high inflation rates, low wage rates, and lower GDP rates. However, due to all these economic problems, the buying power of the consumers have decreased, as they have decreased their spending as well as preferring low priced products or brands over high profile or expensive brands. Moreover, fuel prices have also increased in the U.S, which is giving a tough time to the large as well as multinational companies. In the meanwhile, the buying power of the U.S consumers have largely decreased due to the recession in the U.S economy. Conversely, the multinational companies have compelled to draw investments, as they are unable to offer low-priced products to the low buying power customers. However, some companies even luxury brands such as Mercedes have started to offer low-priced products to the U.S consumers. On the other hand, recently Corning Inc., which is famous for making ceramic glass as well as flat panels, LCD televisions, however, it has cut its more than half investment in the year, 2013. However, the chief financial officer of Corning Inc. has accepted that they become compel to draw their investments due to the low pacing U.S economy.
MONETARY AND FISCAL POLICY
Generally, interest rates are decreasing in the U.S economy due to the recession. However, the federal U.S government has tightened its monetary policy due to increasing recession in the U.S economy. As a result, the U.S economy is facing high inflation, which has decreased the buying power of the U.S consumer. However, it has predicted that the interest rates will increase in the coming year 2015; on the other hand, the interest rates would remain at 2%.
Generally, the Washington policy makers are increasing the debt ceiling due to low investments of the business in the U.S economy. However, the basic reason of increasing debt ceiling by the U.S government is to increase or attract the U.S investors to invest in the U.S On the other hand, both the U.S state as well as government has increased its spending in order to make the economic situation of the U.S better. Moreover, it indicated prior to this U.S government step such as increased spending, the GDP has lowered largely because of decreased U.S spending.
Overall, the U.S government has faced a budget deficit by increasing their spending. However, the budget deficit has recorded up to 4.10% for the year 2013. Moreover, the U.S government has temporarily cut the taxes as well as increased their spending , contrary due to these combined affects, a fiscal cliff has created in the U.S economy, which has pushed the U.S economy back into the recession.
OUTLOOK OF THE USA ECONOMY
Overall, the U.S economy is still facing a phase of recession, which occurred in the year 2008. However, due to this recession in the U.S economy, the GDP has lowered as well as employment rates have increased. On the other hand, the businesses have decreased their investments in the U.S, moreover, they give the reason of low pacing economy of the U.S. Additionally, the buying power of the consumer has decreased, as consumers have compelled to divert towards the low priced products in comparison to luxury products. Conversely, the luxury brands particularly automobile brand such as Mercedes has offered a low priced Mercedes Sedan in order to increase its market share, as it is facing external macroeconomic problems such as low-paced U.S economy, for increased increased fuel prices.
On the other hand, the U.S government is trying to increase its debt ceiling in order to attract or remain focusing the business investors. Additionally, the U.S government has tightened its monetary policy in response to prevailing recession in the U.S economy. Overall, the U.S government is facing the budget deficit, as it has unsuccessful in meeting the needs of the public against the U.S tax incomes.
Igan, Deniz. U.S. Fiscal Policy: A Tough Balancing Act. 30 July 2013. Electronic. 3 December 2013.
The Economist. Monetary Policy: Low Rates Forever. 26 November 2013. Electronic. 3 December 2013.
The Wall Street Journal . GDP's 2.8% Growth Masks Shaky Details. 7 November 2013. Newspaper . 3 December 2013.
Trading Economics. United States Government Budget. 3 December 2013. Electronic. 3 December 2013.