Growth fuels recession debate
WASHINGTON: A surprisingly strong 3.3 per cent spurt for second-quarter growth in the United States has failed to quell a raging debate on the outlook for the economy, which is still being held back by weak housing and tight credit.
Some economists argue that the robust growth pace is the result of temporary factors and that recession remains possible. Others say there are signs that the economy has turned a corner.
Mr Scott Brown, chief economist at Raymond James & Associates, said he sees conflicting signals in recent economic data. ‘A lot of the monthly indicators are suggesting recession, but things like new orders and GDP suggest the economy is improving,’ he said, after the Commerce Department revised upwards its estimate of gross domestic product growth from July’s figure of a 1.9 per cent annualised pace.
Mr Aaron Smith at Economy.com also said the strong figure is misleading.
‘The better-than-expected outcome overall does not change our view that the economy is weakening, with the beneficial effects of rebate cheques and foreign demand fading fast,’ he said.
The revised report reflected a strong upward revision in US exports and a more modest uptick in consumer spending, fuelled by a massive tax rebate programme. Foreign trade alone accounted for 3.1 percentage points in the overall growth rate, offsetting a major drag from the housing sector.
Mr Avery Shenfeld, senior economist at CIBC World Markets, said: ‘A lot of that growth is driven off exports and pessimists might say that can’t continue during slowing growth overseas, but I would say this happened precisely during the period of slowing growth overseas…this is still an economy that faces slow times but not a recession.’
Citigroup economist Steven Wieting said it is hard to resolve the strong growth pace with rising unemployment.
‘If the economy were growing at its potential pace, the unemployment rate would not have risen a full percentage point over the past year,’ he said.
Mr Joel Naroff at Naroff Economic Advisors said the important question is what happens in the future. ‘This was a surprisingly strong report that should end the discussion about a recession, at least for now,’ he said. - AGENCE FRANCE-PRESSE
Source : Straits Times - 1 Sept 2008
Loading ...
Post a Comment
Tell me a bit about yourself; who you are, where you're from, what information you would like to see on this site. As I continue to provide you with Singapore property happenings, your feedback will encourage me to post more frequently. Thank you.