National Economic Picture Brightens

[Sep 19, 2007.]

 

The U.S. economic picture brightened this past spring, thanks to an expansion in the gross domestic product. Still, the national housing crisis and problems within the credit card industry mean there continue to be clouds on the horizon.

During the 2nd quarter of the year, the gross domestic product increased at a yearly rate of 4%, according to the U.S. Commerce Department. That's the best increase in a year. It's also much better than the 3.4% prediction made last month.

The increase in the gross domestic product is being credited to improvements in international trade and in investments in business. Those factors seemed to make up for the challenges being faced in the housing sector.

Still, the housing crisis remains a major concern. Experts say conditions in the housing market are the worst they've been in 16 years. In addition, the troubled credit industry has had a ripple effect in financial markets, resulting in renewed economic concerns on Wall Street.
Meanwhile, experts are predicting that growth in the third quarter will stand at a dismal 2%. Prospects for the final quarter of the year look even worse. It's estimated that growth will fall below 2% this winter.

Still, despite gloomy media reports about the economy, the U.S. is actually in the midst of an economic expansion, and has been for several months. As a result, the nation has been able to avoid recession.
Economists say that, while a recession is still possible, rising exports may help to keep recession at bay. In fact, sales of U.S. products overseas added 1.4 percentage points to the growth rate in the second quarter. Economists are also expressing approval of the Federal Reserve, maintaining that the agency will reduce interest rates before a recession could strike.

The chairman of the Federal Reserve, Ben Bernanke, has stated that the Fed will "act as needed" to boost the economy. It's believed that the Fed may reduce the federal funds rate at its September 18th meeting.

Julie Ann Amos
September 19th 2007

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