Wednesday, November 7, 2007

Where is US Economy heading ?

My opinion on the US macroeconomic outlook is based on the information from websites and The former website gives useful insight by forecasting the leading economic indicators whereas the latter tracks the trends and thus helps to get an historical view and current picture. Based on my analysis, the US economy is poised for a slow down due to various reasons like recent sub-prime mortgage issue, increasing trade deficit, fed’s recent move to lower discount rate to 4.75% and possible quarter point decrease pressuring the strength of the dollar, increasing oil price. The housing sector is poised for a high slowdown with thousand units annual rate reducing from 1281 to 1074. The growing cost of health sector also decreases the discretionary income.

While unemployment rate has risen in the recent months to 4.7% based on the actual indicator from, the suggests this to be rising in the future to 4.73%. The forecast for CPI is also high leading to 209.5 in March 2008 suggesting inflation. The PPI also leads to a constant lower 170’s with no significant decrease. Based on these, ie the increasing energy price and the decreased economic activity could be a double edged sword leading to stagflation. The slowdown in US economy along with an increased global inflation index will discourage US consumer spending and hence the imports. The $9 trillion US debt only sheds the investors away from dollar backed sectors.

While economic indicators can go so far as stated above, history shows that inventions and innovations have always come to the rescue. With US leading the green effort and being a house for R&D till date, a viable alternative to oil that address the scale can turn things around. Interestingly, this is clearly one of the pressing issues that humankind needs an answer. Even more to save the US Dollar.

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