Recession Fears Stalled for Now but for How Long?

October 31 00:00 2011

New York, October 30 ( – After stumbling for the first six months of the year, the U.S. economy has been steadily stabilizing over the summer dispelling lingering fears that recession is round the corner. However, the question that is tormenting everyone is whether this trend can be sustained?

The Commerce Department said Thursday that the economy grew at an annual rate of 2.5 percent in the third quarter but this growth was more due to Americans spending more while earning less and businesses investing in machines and computers and not workers. For the economy to have any impact on the unemployment rate that has stayed near 9 percent since the recession officially ended more than two years ago, it would need to grow at nearly double the third-quarter rate.

The report on U.S. gross domestic product, or GDP, has portrayed an optimistic picture of an economy that was at risk of another recession only two months ago. It was released on the same day that European leaders announced a deal to combat the sovereign debt crisis.

Although stocks surged on the European deal and the report on U.S. growth, David Wyss, former chief economist at Standard & Poor’s said, “It is still a very weak economy out there.” However, higher stock prices would make consumers feel more confident about their wealth and they might spend more, which would help sustain economic growth.