American Economy Shows Surprising Strength

[Jul 12, 2008.]

 

The US government has recently revised its estimate of the US economy during the first quarter of 2008. The new numbers show that America may have skirted economic recession.

Today, the Department of Commerce reported that America's GDP experienced an increase amounting to 1% per year during the first quarter of 2008. This is the Department of Commerce's third report on America's GDP for 2008. Earlier, the Department of Commerce had given a lower percentage estimate of the GDP's growth: 0.9%.

Americans have been buying more than was thought. Consumer purchases comprise approximately 70% of the US GDP. Although Americans have been buying fewer manufactured items, the amount of money they spent on services has compensated for this. Thus, the total increase in US individuals' spending in 2008 for is at 1.1%, according to the Commerce Department's new estimates. This is sufficient to keep America from experiencing a recession.

Manufactured goods sold outside the country have also been bolstering America's economy. The decreasing value of the dollar has had one up side for the economy: the amount of American goods sold abroad has grown at an annual rate of 5.4% during 2008. This healthy rate of exports has caused an increase of 0.66 percentage points in GDP growth.

Analysts are largely optimistic about America's economy during the second half of 2008. The government tax rebates have contributed to greater spending in May. The rate of exports is likely to stay high. Analysts predict that the rate of annual GDP growth may increase to 1.5% or even 2% before the year is over.  The Federal Reserve is definitively holding off from interest rate cuts. "Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending," says a Federal Reserve rep.

The major scourges of the US economy for this year continue to be high food and fuel prices, and fewer jobs. Some analysts are concerned that these factors will prevent the economy from growing at a normal rate.