Is the American economy in recession????
February 26, 2008 10:37am CST
With share prices down sharply over the last year and with frequent announcements of substantial profit declines and major employee layoff's, its not surprising that the Recession word is on the minds of many people. That concern about recessio has driven consumer confidence down sharply even though national output or GDP actually rose in the first quarter of this year. There is no doubt that the manufacturing sector of the US economy is now in recession.Output in the manufacturing peaked last September and has been declining over since then.Manufacturing employment and the sales of manufactured products are also down. The Federal Reserve obviously thinks there is enough risk of a recession to warrant the sharp reduction in the short term interest rate taht it has engineered during the past four months. And although lower interest rates cannot raise a defunct dotcom company from the dead or stimulate new equipment investment in a manufacturing firm that is experiencing collapsing sales and has substantial excess capacity,lower interest rates can stimulate more activity in some parts of economy which can eventually spread to all sectors fo the economy. The lower short term interest rates by Federal Reserve have brought down mortgage rates,lifting the sales of new and old homes to record levels. That not only stimulate more home building but also leads to more sales of furniture and other consumer durables.Lower interest rates also reduce the monthly payments on existing adjustable rate mortgages,leaving households with more money to spend on everything from clothing to pizzas. Eventually that extra spending will increase operating rates and profits of a wide range of businesses. And that in turn will lead to more investment in new plant and equipment. The rising sales and resulting profits should also increase share values, further encouraging additional consumer spending. The US Economy grew at a surprisingly strong 3.5% in the fourth quarter of 2006,up from a 2 percent rate in the third quarter. A survey released by the National Association for Business Economics showed that experts predict economic growth of 2.7% this year,the slowest rate since the 1.6% rise in 2002. Greenspan the former head Federal Reserve also warned that the US Budget deficit which for 2006 fell to $247.7 Billion the lowest in four years, remains a concern. Based on the above facts do you support that American Economy is in recession??????
26 Feb 08
Hi there, Yes u r right and all these are affecting our market as well. I think our market is quite volatile and any major uosets there causes crashing of prices in our shares. I think dollar values are going to go down and indian economy will be benefited. Cheers, Tutul