Recovery US economy threatened by weak Greenback

10-23-2009 07:22

The current economic growth may not be sustainable, despite the fact that recent figures demonstrated that the US economy has left the most intense period of the economic slump behind. The gloomy situation of the US labor market will lead to lower consumer spending, which will have a negative influence on economic growth. Furthermore, the continuing weakness of the Greenback will in the end make it more difficult for the United States government to continue borrowing funds from abroad in order to fuel its economy.

Recovery US economy

In fact, the sentiment towards the United States economy becomes more positive as the economy is forecasted to grow by 3% in the second half of this year. Indeed, industrial production rose for third straight month in September and stocks decreased further. In addition, retail sales climbed in August and in September it rose even without care sales. The housing market crisis seems to have ended and existing home sales and housing starts grew.
Nevertheless, September showed more job losses than August and the jobless rate rose to 9.8%, which is the highest level since 1983.

Threatened by weak Greenback

Obviously, if employment fails to improve, households are not able to generate income and bring about the demand that is required to increase production levels. Moreover, the expectations for low interest rates during an extensive period together with the largest fiscal deficit on record shuns investors away from US Dollar-priced trading options and devaluates the Greenback. So far this week’s trading session, the Greenback dropped beyond $1.50 per Euro, which was the first time within more than a year. Even though a weak Greenback stimulates exports, import prices are also increasing, which could lead to economic stagnation in combination with inflation.