Washington, D.C. – Both businessmen and consumers minimized their spending after the US government shutdown. Based on reports, the US economy is beginning to gain much from it despite threats of US Economic Collapse.
From July to September of this year, the US economy has been growing well which surprised many when the US government collapsed in October.
For the past month since the government shutdown, the economy has not been working well. But due to businessmen’s and consumer’s minimized spending, it is already experiencing progress.
On US economic growth
Analysts are surprised as the Commerce Department revealed that the economy has grown to 2.8 this year which is really a great result since the 2.5 that it had from April to June.
The Federal Reserve still sees no good reason to bring its condition back to what it had before the economic collapse.
However, the company inventory buildups rampantly happening today are starting to give the Fed a reason to change its mind.
Sung Won Sohn, a professor at the Martin Smith School of Business at California State University, says that the economic growth is growing but it is growing for the wrong reason.
Clearly, as what the inventory buildups are suggesting, there has been an overestimated consumer demand.
Furthermore, Sohn said that companies are now warned to minimize their hiring to reduce the size of their inventory and to control consumer spending.
Economists remain optimistic
Despite the slightly negative view on economic reports, some analysts still believe that what’s happening is not bad for the economy such as Chief US economist Joseph LaVorgna of the Deutsche Bank Securities.
He mentions that consumers are already showing a sign of confidence from the huge purchases that they had during the third quarter.
That, too, is the reason why manufacturers are raising the size of their production – the signs of greater consumer demand.
LaVorgna also predicted that the economy will grow up to 3.5 this year if the strength continues to manifest before the year ends. If his prediction is right, the US economy will experience its best in two years.
LaVorgna also adds that the consumers are not to be blamed when it comes to the discussion of consumer demand. The services, on the other hand, are quite weak.
He says that the consumers are performing well, especially when it comes to purchasing the most cyclical items such as cars.
The annual growth rate of consumer spending decreased from 1.8 to 1.5 due to weak services during the past quarter.
On the other hand, huge and longer-lasting purchases make the percentage of consumer spending much higher. It has risen up to 4.3 this year which is the best and the fastest that it has ever had since 2012.
In addition to these, overall government activity and Federal government spending decreased, too. Economists also think that it is more likely that the current status of the Federal Reserve will be maintained for the next months.
The economic shutdown is projected to make 2014 a better economic year for the US despite the $24-billion loss that the government experienced during the shutdown.