The better than expected performance of the world's largest economy during the fourth quarter puts growth for entire 2015 on positive mode. The encouraging recovery of economy in the last quarter has wiped out fears about possible recession. Meanwhile, the US government may tighten its monetary policy.
According to the latest data from US Commerce Department, the US economy grew one percent during September-October quarter in 2015 against the forecast of 0.7 percent. Its fragile economic status witnessed moderate and positive growth pattern and it was not as terrible in 2015 as it was feared earlier. Economists alert that the economy is not going to be on full swing of recovery, but it's likely to remain under pressure.
CNN Money reports that the surging US dollar is shrinking the manufacturing sector. Despite the fourth quarter's encouraging performance, the US government has not raised growth forecast for the gross domestic product (GDP) for 2016. An unexpected rise in inventories and weakening demand in imports are still bothering the US government. The robust growth in inventories may set off growth during the first quarter of 2016.
Economists strongly feel that the US economy is in rebound mode during the first quarter of 2016. The first quarter growth rate may be at very encouraging level of 2.5 percent owing to stronger consumer demand. International Monetary Fund (IMF) recently warned that there would be further cuts in global growth forecasts. IMF has already cut growth forecast to 3.4 percent from 3.6 percent.
Supported by better than anticipated growth in fourth quarter of 2015 and expected higher growth in the first quarter of 2015, the US can withstand with global economy slowdown. The latest numbers will enable the US government to tighten monetary policy, while Europe and Japan are losing monetary policies as part of their measures to strengthen economic growth, as reported by The Guardian.
In addition to the encouraging performance of economy during last quarter of 2015, the world's largest economy recorded encouraging growth in consumer spending. The consumer spending rose 0.5 percent in January 2016 from 0.1 percent in December 2015. The latest consumer spending is considered to be the best since May 2015. Consumer spending contributes two-third to the US GDP.
The US Federal Reserve is closely observing the economic data just to ascertain how sooner it requires going for another interest rate hike in 2016. Last time, it raised interest rate in December 2015 in two decades. Inflation rate reportedly rose 1.3 percent for the 12-month period ending January 2016, almost twice from 0.7 percent for the 12-month period ending December 2015, according to The Columbian.
The US GDP growth rate was 0.6 percent for the first quarter of 2015 and then rose to 3.9 percent in the second quarter. It eased to two percent in third quarter and was one percent for the fourth quarter. Based on steady job growth and wage rise, economists predict faster GDP growth rate during the year.
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