Markets Bolstered by US Growth
October 28, 2011
Better than expected growth of the US Economy has added to the soar in financial markets following the eurozone agreement.
Figures from the US Commerce Department yesterday revealed that the American economy expanded by 2.5% in April, May and June. Though not particularly large, the figure is considerably greater than the 1.3% recorded in January, February and March.
Stock markets, already buoyed by Wednesday’s eurozone agreement, reacted positively to the news. Last night, the Dow Jones Industrial Average closed at its highest position since the beginning of August.
Economists and business leaders have welcomed the news as a sign that the US may be moving away from the much feared double-dip recession.
Ian Shepherdson, an Economist at High Frequency Economics, told the New York Times: “It ain’t brilliant, but at least it’s heading in the right direction…I want to see 4%, but given people were talking about a new recession, I’ll take 2.5% or 3%.”
The US Economy has endured a torrid time in recent months. In July, the US had its debt rating downgraded for the first time ever following a political deadlock between Democrats and Republicans over the expansion of the government debt ceiling. More factitiousness over President Obama’s Jobs Bill has added to the sense that politicians remain fundamentally divided on how best to revive the world’s largest economy.
Yesterday’s figures also revealed a drop in the amount of Americans becoming unemployed. Yet a significant dent in the 9.1% unemployment remains conspicuously absent.
Furthermore, despite the fact that yesterday’s higher than expected growth figure was driven by a boost in consumer and business spending, analysts doubt that such spending is sustainable.
“Americans are much more conscious about adding on a lot of debt to their balance sheet,” said Kathy Bostjancic of the Conference Board. “CEO confidence is starting to melt away, along with consumer confidence levels, which have always been low.”
Amidst the ambiguity, many believe that the only certainty for Americans from the last few days is the level to which their economic recovery is interlinked with that of Europe.
By Dermot Tobin
[Image courtesy of rolfkleef]