Economic Overview
The good news for 2001 is our economy has managed to stay clear of a recession. However, the economy has fallen to a remarkably low growth rate and is in a precarious position. The Federal Reserve’s portrayal of the U.S. economy is one of “slow growth or lateral movement.” As corporate profits sink and huge layoffs are constantly being broadcasted, consumer confidence has begun to seesaw. Consumer spending is the key to preventing the economy from declining further; it accounts for two-thirds of economic activity. Thus, while corporations refrain from capital expenditure, the average consumer could be the one to lift our economy from it current malaise. This outcome is very possible as the unemployment rate holds at 4.5%. In fact, the unemployment rate is capable of increasing to between 5.5% and 6.0% while maintaining a non-inflationary GDP. Another positive aspect of the present economic situation is the lack of inflationary pressure. With tame inflation, the Fed is free to cut interest rates in an effort to stimulate the economy.Gross Domestic Product in the first and second quarters of 2001 came in at 1.3% and 0.7%, respectively; well below the 2.3% and 5.7% for the
Ongoing easing in monetary policy is likely in the coming months. The factors driving these rate decreases are: falling corporate profits, decreased business investment, and waning consumer spending. With inflation tame, policymakers will reduce Fed Fund Rates two more 25 basis point reductions over the remaining year to end with 3.25%. It is highly unlikely they will allow the Fed Fund Rate to drop below 3.0%. Starts/Replacements Actual 1999 Actual 2000 Projection 2001 Forecast 2002 Forecast 2003 Forecast 2004 Forecast 2005 Single-Family 1,302 1,233 1,260 1,250 1,250 1,245 1,250
Some topics in this essay:
Industry Household,
Domestic Product,
Price Index,
Federal Reserve’s,
Starts/Replacements Actual,
Federal Reserve,
Likewise Fed’s,
Remember Fed,
Economic Overview,
Fund Rates,
household formations,
growth rate,
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easing monetary policy,
housing market,
business investment,
housing sector,
monetary policy,
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consumer spending,
gross domestic product,
non-inflationary growth rate,
business activity,
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Approximate Word count = 1082
Approximate Pages = 4 (250 words per page double spaced)
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