[QODLink]
Business
Unexpected growth for US economy
Struggling economy registers unexpected growth, but high unemployment remains an obstacle for further growth.
Last Modified: 23 Nov 2010 18:04 GMT
The US economy needs to grow twice as fast in order to decrease the current unemployment rate of 9.6 per cent [EPA]

The US economy has grown by 2.5 per cent in the third quarter, the country's commerce department has said.

The growth rate announced on Tuesday was much faster than first thought, with the department previously reporting that the gross domestic product (GDP) rose by 2.0 per cent in the period from July to September.

The increase was attributed to higher consumer spending, firms rebuilding inventory, stronger exports and more government outlays. Weaker imports also helped increase the figures.

The increase in growth comes after the economy slowed earlier in the year, advancing at a rate of just 1.7 per cent.

However, the economy would need to grow at least twice as fast as it did in the third quarter to decrease the current 9.6 per cent unemployment rate - which is why the government introduced a second stimulus package.

The packed is aimed at enticing the public to spend more by making loans cheaper and by boosting stock prices.

But very few politicians in Washington - including Ben Bernanke- the chairman of the Federal Reserve think the programme will create the robust growth needed to ratchet down the unemployment rate.

In the third quarter, consumers boosted their spending at a pace of 2.8 per cent, the most in nearly four years.

That was a stronger showing than the 2.6 per cent pace first estimated. Even with the improvement, consumers would need to spend more to have a significant impact on the jobs market.

This is attributed to the fact that consumer spending accounts for roughly 70 per cent of all national economic activity.

Weak outlook

Meanwhile, sales of US exports to foreign customers grew by 6.3 per cent in the third quarter, another factor in the third-quarter increase. That is compared with a five per cent growth first estimated.

A weaker value of the US dollar is helping those sales. The falling dollar makes US goods cheaper - and thus more attractive - to foreign buyers.

According to analysts, the economy would need to grow by five per cent for a full year to push down the unemployment rate by a full percentage point.

But for all of this year, the economy is expected to expand by 2.6 per cent. Faced with such a weak outlook, Bernanke does not think the central bank should not attempt to invigorate the economy,

However, China, Brazil, Germany and other countries have expressed concern by the US government's bond-purchase plan.

They have complained that is intended to further drive down the value of the US dollar, giving U.S. exporters a competitive advantage over their foreign rivals.

Republican economists and politicians have also criticised the move, saying it could lead to uncontrollable inflation.

Bernanke has repeatedly rejected such criticism.

Source:
Agencies
Topics in this article
Country
City
Organisation
Featured on Al Jazeera
More than one-quarter of Gaza's population has been displaced, causing a humanitarian crisis.
Ministers and MPs caught on camera sleeping through important speeches have sparked criticism that they are not working.
Muslim charities claim discrimination after major UK banks began closing their accounts.
Italy struggles to deal with growing flood of migrants willing to risk their lives to reach the nearest European shores.
Featured
In Brussels, NGO staff are being trained to fill the shortfall of field workers in West Africa.
Lawsuit by 6-year-old girl, locked up for a year, reignites debate over indefinite detention of 'boat people'.
Indonesian and Malaysian authorities are keeping a close eye on local supporters of the hard-line Middle East group.
Citizens of the tiny African nation say they're increasingly anxious of the fallout after alleged coup.
A humanitarian crisis and a budget crisis converge in the heart of the human smuggling corridor in Texas.
join our mailing list