Saturday, July 31, 2010

When US economy slows sharply...

WASHINGTON - A new government report Friday showed that US economic growth slowed sharply in the spring, providing more evidence that the fragile recovery is losing momentum and is unlikely to generate many jobs anytime soon.

The nation's economy grew at a modest 2.4% annual rate in the April-to-June period, the Commerce Department said in its first estimate of gross domestic product for the second quarter.

That compares with a GDP growth of 3.7% in the first quarter – a figure adjusted up from 2.7% reported earlier. But Commerce officials revised down the growth in the fourth quarter of last year, to 5% from 5.6%, as it did for prior quarters, painting an overall picture of a deeper recession than previous data suggest.

The latest slowdown in real GDP -- the total value of goods and services produced inside U.S. borders after adjusting for inflation -- was widely expected by analysts. The data confirmed a recent softening of consumer spending, and a much weaker trade balance in the second quarter offset continued strong gains in business spending for equipment and software.

Many analysts have forecast even slower GDP growth for the second half of this year, taking into account the increasingly smaller support that the economy is getting from government stimulus and a restocking of companies' inventories that had been slashed during the recession.

Some government programs have expired, such as the first-time homebuyers' tax credit, which has set back the housing market. And anemic job growth and the debt crisis in Europe have roiled financial markets, adding to consumers' jitters about spending and businesses' cautiousness about hiring and investments.

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NOTE: The Malaysian economy depends much on the sentiments of the US economy. While Europe is beginning to feel the heat on them, Asians like Japan, Korea and China too are taking necessary steps to minimise the impact. As the government of Datuk Seri Najib Tun Razak has introduced several measures, including economic packages to tackle such an onslaught, the key question here is whether such methods are sufficient in ensuring a dynamic GDP, reduced inflation and an 'under-control' recession.


mr surplus said...

us is losing its position to china as the world's largest economy. while countries like china and vietnam are fast booming, the american economy is almost stagnant due to its over expenditure to finance the war in iraq and afghanistan. this has led to its deficit ballooning.

malaysia is not that worried because we advocate to a prudent economic implementation.

the only thing that we should watch is the flow of fdi which declined marginally this year.

DOL said...

yes, it is so bad that the IMF has advised the americans to take pre-emptive economic measures to avoid further adverse impact on its economy.

however, barack obama is still very confident...

a reporter said...

President Barack Obama has clashed with Republicans over the need for government to step in to help the ailing economy, making spending one of the toughest fought political battles in the US capital.

Obama's critics accuse the president of putting Americans' futures at risk by ballooning US debt through ineffective stimulus spending.

Obama was set to visit Detroit later Friday to tout a 64-billion-dollar bailout which kept the city's automakers afloat, promoting it as the type of "tough decision" needed to avoid economic depression.

But the IMF -- after earlier arguing strongly for the US to cut its debt levels -- said a bleak economic outlook could make further spending necessary, and could prompt a delay of planned budget cuts.

IMF directors saw scope for a smaller up-front fiscal adjustment if downside risks materialize, complemented by measures to bolster medium-term credibility.

The comments comes against a bleaker economic backdrop than when the IMF last reported on the US economy in early July.

A key US government report Friday is expected to show the recovery is losing pace.

Analysts expect gross domestic product to have slowed to 2.5 percent in the period, down from 2.7 percent in the first three months of the year.

Should the trend continues, the IMF said its impact would fast reach Europe and Asia.

Anonymous said...

US interest rates have been at zero since December 2008 and, at each meeting, the Fed's open market committee has reiterated its plan to keep rates exceptionally low for an extended period. this incantation is starting to have a perverse effect. Instead of assuring business that the Fed will rev up the economy, and with it inflation, the words now seem to presage a world of persistently low rates and persistently low prices.

graham said...


There are enough drags on the US economy as is. Large public and private debts have to be sweated off.

malaysia needs to learn a lot from such weaknesses

aman sahib said...

amerika sebenarnya terjebak di dalam masalah yang diciptanya sendiri. peperangan yang dilancarkan ke atas iraq dan afghanistan adalah jerat utama yang menjejaskan ekonominya kerana perbelanjaan berbilion dolar yang dikeluarkan untuk maksud sedemikian. begitu juga pembiayaan besar yang diberikan kepada sekutu utamanya, israel.

Anonymous said...

When Msia economy up becoz Najib pandai. Skg nak down, pasal US pulak. Tak masok akal. Najib letak jawatan.

Shamsul Yunos said...

The low petrol demand in summer is another worrying trend Jai

here is another interesting story..
Anwar says Ling Liong Sik is not a big enough fish for MACC: Who does Anwar want MACC to go after? read all about it HERE

cilacap said...

the us economy has been overheating over the past six years due to its heavy spending on the war in iraq and afghanistan.

thats why laaaa....

underworld said...

malaysia tidak boleh leka walaupun petunjuk arah ekonomi kita agak memberangsangkan.

kalau kuasa ekonomi dunia seperti amerika boleh merudum, apatah lagi negara kecil macam kita.

banyak pengajaran boleh ditimba, terutamanya dalam langkah jimat cermat dan mengelakkan projek tidak perlu