The economic crisis in the U.S. is far from over. A decline in the GDP has taken economists and business analysts by surprise. This is the first time in over three years that the U.S. economy dropped at an annual rate of 0.1%. According to the Commerce Department, what the U.S. is experiencing now can be considered its worst performance since October of 2009.
Reality of Economy Far from Expectation
Economists have expected a growth of 1% for the first quarter of 2013. That is why they were taken by surprise when Dow Jones hit a record 52-week high on Tuesday. This was followed by the U.S. stock markets falling on Wednesday. In line with this, European markets also fell.
What Caused Unexpected Decline
Based on reports, the unexpected decline of the U.S. economy can be traced back to the government cuts that have heated things up during the last quarter of 2012. The total decrease in government’s spending as of the first quarter of this year is at 15% and this was dragged further down by a 22% spending in defense. This is big deal since the government continues to be the biggest employer for more than half of all able Americans.
To make things worse, private companies also decided to cut on their spending in preparation for the fiscal cliff that will be implemented in March.
All is not Lost: Some Sectors Still Improving
If you would look at some specific sectors of the U.S. economy, you would know that that there are a few industries that are actually improving. One of these industries would be the job market. According to the chief economist of Moody’s Analytics, there have been monthly gains in the job market that range from 150,000 to 175,000. These jobs come mainly from the private sector.
The housing market is still improving and is not showing any signs of slowing down. Construction is said to be kicking in high gear. The richness of the housing industry has helped offset the weakness noted in the manufacturing sector. The house prices were up by 5.5% as of December of last year and this continues to be the case today.
Another key sector that is helping the U.S. economy would be the consumer spending. The health of the consumer spending sector is primarily due to the fact that the businesses that have been affected by Hurricane Sandy have already resumed operations. Also included in the consumer spending mark would be the continued good health of the loan industry. Bad credit loans are still the most preferred instant cash options by the American employees.
However, economists say that the data are quite unstable since Friday’s employment has not yet been verified. They advise that it will be best if you don’t dwell on the number too much as they will Federal Reserve is set to the change the final GDP figures on March.