The Slowing U.S. Economy: What Statistics, Trends and Outlooks Are Showing
The Slowing U.S. Economy: What 2016 Statistics, Trends and Outlooks Are Showing
Statistics relating to market performance show that the U.S. economy has been on a roller coaster in recent years. Conflicting reports of growth, recession, job creation and consumer spending have led to instability in the stock market and wariness among consumers. Workers are demanding higher wages even as job growth declines, and the performance of world economies is leading some to project an even slower future for the domestic market.
U.S. Economy Outlook Shows Weaker Growth for the Coming Year
As 2016 got underway, the International Monetary Fund released new projections regarding global economic growth. The group had predicted a growth rate of around 3.6 percent in their report from October of the previous year but lowered the number to 3.4 percent. Projections for the United States were dropped from 2.8 percent to 2.6 percent. The World Bank echoed the trend with a similar global prediction of 2.9 percent, down from a previous estimate of 3.3 percent.
The performance of emerging economies in countries such as China is having an impact on markets around the world. When countries with large amounts of potential buying power show slower growth, it means less money going into the global market and creates a drop in demand for manufactured goods. With manufacturing in the United States already in a recession, further decreases could pose problems for economic growth at home. Compounding the issue is the Federal Reserve’s plan to tighten monetary policy rather than create a strategy to support the economy during this most recent downturn.
Economic Trends to Watch in 2016 at Home and Around the World
Any country that is currently growing or has grown rapidly in the recent past has the potential to impact the growth of other big players on the world’s economic stage. Keeping an eye on China and other developing economic powers is crucial to understanding how the U.S. economy may change in the future.
Several other factors come into play when determining economic performance:
- Lower fuel prices affect the energy and manufacturing industries.
- Falling commodity prices lead to cheaper goods and a lower inflation rate.
- Increased value of the dollar makes goods more expensive for other countries to purchase.
- Consumer spending behaviors influence supply and demand as well as pricing structures.
Policies put in place by the Federal Reserve have the greatest impact on the overall health of the U.S. economy. The Federal Reserve sets baseline interest rates that influence borrowing and purchasing among consumers and businesses. Purchases and sales of government securities made by the Federal Reserve on the open market directly influence how much money and credit is available in the economy, and these levels affect all other sectors associated with finance.
The Federal Reserve, Jobs and Inflation: How Common Factors Affect Growth in the U.S.
The interest rate set by the Federal Reserve is called the federal funds rate, and it determines the rates that all banks charge on short-term loans. When it’s cheaper to borrow money, individuals and companies are more likely to take out loans and increase spending. This, in turn, drives up supply and demand in the manufacturing sector, spurring job growth that brings even more money into the economy. This upward trend supports a healthy level of inflation that reflects the increase in demand.
Unfortunately, the latest reports show that jobless claims in the United States hit a six-month high in January of 2016, clocking in at 293,000. This is just a little over 1 percent higher than the projected 278,000. Fewer jobs mean fewer people bringing in an income that can support extra spending, leading to a reduction in the amount of circulating capital and less need for the goods and services that continually flood the U.S. market.
Because consumers and investors react to what they expect to happen in the future, economic projections often have a bigger impact on performance than current statistics. In light of this, the recent prediction by Nomura showing a 24 percent possibility of a recession in the United States is likely to have a ripple effect across markets.
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