US Economy, when will we see normalcy again?

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2008 Recession is known to be one of the worst recessions since World War 2. Households are not only cutting their day to day expenses, but also resorting to long term life adjustments, i.e. Lower borrowing and greater saving…… Unheard of in the US, isn’t it…..it’s true, numbers reveal it!


Below are some facts

  • Consumer spending on real terms fell by 3.7% in the 3rd qtr, economists feel this will continue with a greater bang in 2009
  • Saving as a %age of after-tax income rose to 1.3% vis-à-vis 0.4% in 2005
  • Factory orders dropped by 12% over the last 2 months
  • 533,000 job losses, rightsizing, off boarding….whatever you name it, happened in November 2008.
  • 725,000 job losses in September and October 2008. Unemployment rate is at its worst since 1975. There has been total of 2 million job losses from Dec 2007, Goldman Sachs forecasts 2.3 million more job losses by Mar 2010.
  • Drop in car sales
  • 5.2% of total mortgage are in foreclosure or will soon be there as against 1.9% in 2005
  • Falling home and stock prices. Economists estimate $ 5+ trillion loss in asset losses between Apr 2007-Dec 2008

Only thing to rejoice is dropping gas prices, from a rate of 140 per barrel to $ 35, and continues to have a free fall! Households are more dependent on income growth for their spending and saving, and less on credit and wealth.

While the experts feel, the light at the end of the tunnel will be seen sometime by end of 2009 or early part of 2010, I’m of the view that we may see a ray of hope sometime by July 2009. The impact of stimulus packages rolled out by US congress, other fiscal measures, changes in central administration, falling gas prices, fat cutting initiatives by corporates, and the fundamental life style changes….after all, has to bring about some quick changes….
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Sudhir Pai, author of this post, is the CEO of GVA, Inc (www.globalvalueadd.com). The views expressed in this post are personal views of the author. GVA serves the Individual, & SME community by offering a wide range of services, which typically are offered by a large HR consulting and Big 5 Accounting firms. Services include, Mobility services, Taxation,  Incorporation, Accounting & Payroll processing services. Write to sales@globalvalueadd.com for additional information about GVA & its offerings. Disclaimer: GVA does not offer legal services or legal advice, but only generic information on legal subjects. GVA is not an attorney or law firm and not a substitute for an attorney or law firm.

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  • Sathyanarayana K

    One thing is very clear from reading this US economy blog is that “HISTORY REPEATS”. I remember my grand fathers saying- we use to get Rice for 0.10 cents once upon a time & i hope it may repeat again very soon, in other words its a clear picture of down fall of the Economy & at the same time i want to make all readers very clear that it’s one of the superb data collections from GVA & team…

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