Wednesday, February 5, 2014
Consumer Spending Propelled Fourth-Quarter Growth: Economy
The subject of this article deals primarily with the growth in the US economy in Q4 but also talks about the international facts that relate to economic growth. To start off with consumer spending grew by 3.2 percent in Q4. With this business investments and the amount of US exports increased as well. Although GDP grew overall the housing market played a downward role on the economy due to the extreme cold weather that decreased selling as well as production of houses. The government shutdown is believed to have cut GDP by 0.3 percent. In addition to cutting GDP this shutdown could have been the cause of the reason that government spending had declined, from year to year, the most since 1971. Finally the Fed recently voted to reduce bond purchases by $10 billion to $65 billion because of the improvement in the economies growth.
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I think it is great that our government has been decreasing federal spending. Although we are still recovering from the recession and an increase in government spending would help our recovery, it is a better policy to reduce spending now since the government debt is already an issue that we will have to confront long-term. While this winter has been negative on our economy so far, I'm sure that we will also see improvements in the housing industry when summer comes around. By then, I would expect more houses to be bought by consumers.
ReplyDeleteAll time lows and subzero temperatures has slowed economic growth, not only in the housing industry, but also the automobile industry. Consumers that were interested in purchasing cars stayed home last month. Freezing temperatures caused an unexpected drop in sales of 3.1 percent. This is a major problem especially since manufactures want to increase production output. Only problem is that higher than expected number of unsold vehicles are still sitting in the lots. Due to poor January sales, car dealerships run the risk of having to discount cars just to get them sold and meet 2014 forecast numbers. As cold weather continues to consume the United States, the more automakers will feel pressure to reduce production or cut prices to meet demand. Managing the amount of inventory is one of the most important aspects of generating revenue in these bitterly cold months for car dealers. Dealerships remain hopeful however that sales will boom when temperatures begin to rise again.
ReplyDeleteI am not surprised that consumer spending increased by 3.2% percent in Q4 because it is the holiday season. With this winter being one of the coldest in many years, it does not surprise me that the housing market was negatively effected by the harsh weather of this winter. I expect that the housing market will experience some recovery once we reach warmer weather in the spring as well as summer. I also am very pleased to see that government spending is on the decline. The debt that our government has created is a large issue that should not be taken lightly.
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