US Economy Steadily Recovering Following Better Consumer Spending

Earlier this year, pessimism is high regarding the future of the US economy. However, everyone was taken by surprise with the new turn of events. The recent data shows that the US economy has expanded more than what was estimated following an improvement in trade deficit, more business inventories, a more active household spending on utilities and the increase in the number of borrowers who are paying back their loans plus interest rate.

According to the US Commerce Department, one of the main reasons for the unexpected growth in economy is the 1.7% increase in gross domestic product. It must be remembered that the last quarter of 2011 and the first two quarters of 2012 have been marked with minimum spending per household. Although households are still frugal these days, they now spend more.

Consumer Spending

About 70% of the economy is independent on consumer spending. Data shows that as of today, consumer spending has increased by approximately 1.7%. The largest contributor to the increase came from gas and electricity spending, with notable contributions from the housing industry.

Further, the consumers’ purchase power has eased following the adjustments of disposable income for an increase in inflation and a 3.7 percent gain after June. The saving rate, on the other hand, went up to 4% from the 3.6% during the first quarter of 2012.

Trade Deficit

The US economy remains strong despite the weaker global market. Demands for US-produced goods have increased to fill the hole left by the worsening debt crisis and tougher budget cuts in the euro-area.

The housing market, on the other hand, has picked up in terms of prices and sales. Construction of residential homes has advanced by 8.9 as of last quarter.

Business Inventories

The output of motor vehicles has increased by up to 0.18 percent and this has further helped the economic recovery. However, this recovery can only be sustained if matched with faster employment gains.

Increase in the Number of Borrowers Who Can Pay Back Their Bad Credit Loans On Time

Bad credit loans have become the number one resource of households.These are high risk loans that do not require credit checks. However, creditors have been struggling with the number of borrowers who are not able to pay their loans on time.

During the second quarter of this year, however, creditors have reported an increase in their loan collection rates.
The economy is slowly climbing up. Although it is still fragile, the advancements noted above are helping Americans stand again. If the positive reports continue, recession will only part of history once again.