The USA is still the world’s largest economy and its fortunes have a knock-on effect in other economies around the world. Initial estimates (always subject to revision) of economic growth in the second quarter of 2012 suggested that the economy had grown at an annualised rate of 1.5%. Whilst this level of growth is indeed modest, it compares favourably with several other leading economies which contracted over the same period.
The economic data for Q2 has been revised upwards to show that the US economy grew at an annualised rate of 1.7%, according to the US Department of Commerce. Unemployment in the USA is staying stubbornly high at about 8% of the workforce. Unemployment is a lagging indicator of economic performance and the fact that it is remaining high simply highlights the weakness of the global economy following the global financial crisis. Indeed, the US economy has “come off the boil” (I’d like high marks for irony, please) in the most recent quarter as the Q1 growth came in at an annualised rate of 2%.
The US Presidential election season is upon us and the nation’s economic performance will be a key issue. The US Congress’s budget office (CBO) has been warning that spending cuts and tax rises may trigger a sharper economic slowdown next year. CBO is predicting that the US recovery will continue “at a modest pace” for the rest of the year, but that the cuts and tax revisions could push the economy into recession in 2013.
In its report, the CBO said it expected the US recovery "to continue at a modest pace" for the rest of 2012 but warned that "substantial changes to tax and spending policies" would cause the US to tip back into recession next year.
The US Federal Reserve has pumped $2.3 trillion into the economy in stimulation measures (under the quantitative easing initiative, mainly) over the past 4 years. This equates to more than $10000 per American citizen.