Macroeconomic Situation - Essay Example

Download file to see previous pages... As a result there are lesser incentives for the manufacturers to increase the production and so reduced industrial production is anticipated. The consumer spending, on the other hand, has increased rapidly (especially for food items), despite the fact that the household incomes had been reduced in the last quarter of 2009. Meanwhile, the inventories for the consumer goods and business supplies have reduced considerably in contrast to the inventories of different materials and equipment. Further, the inflation rate was anticipated to increase recently because of the increase in the oil prices. However, the personal consumption expenditures (PCE) inflation has remained more or less the same as the previous year. (FRB, 2010) The overall GDP has risen 14204 billion dollars after an increase of 5.6% in the last quarter of 2009. At this rate of economic expansion the economy can easily recover within a few months. But that is not quite likely.
Despite the fact that the economy has improved considerably since the last quarter of 2009, it is still important to consider the fact that the US economy has grown only 0.1% over the last one year. (Fedec, 2010) Since the percentage by which the output worsened in 2008 was 1.9%, a lot of economic growth is needed to cover up for the loss. Also it is pertinent that the government gives importance to the strong expansion of the economy. Out of the 5.6% of the increase in the GDP over the last few months, 3.9% has been due to the rebuilding of inventories. (Fedec, 2010) Once the inventories are created the production is likely to fall. As a result the overall output production may fall.
Although the labor market has improved considerably, the unemployment rate still is the highest that has been recorded in the last 26 years. (Fedec, 2010) If nothing is done by the government in this regard the situation can worsen. The ...Download file to see next pagesRead More