US economy is growing amidst looming global financial crisis
Sep 04, 2015 09:11 AM EDT
With current economic uncertainty, investors and citizens are asking whether the country will get affected by the looming global financial distress.
Latest report by Business Insider shows that despites the turbulence, US economy has grown by 3.7 percent in the second quarter of 2015, and the unemployment rate fell to 5.3 percent this year compared to 6.2 percent last year.
The positive data said Paul Ashworth, chief U.S. economist at Capital Economics will provide Fed with good reason on whether they will increase the rate or not this September.
An increase in rate by the Fed is a good thing for the US as it signifies that the US economy is growing and the Fed is agreeing with the situation. However, the rate hike will also have a negative impact to the stock market as things might get slower after that.
However, Forbes suggests the US still need to be careful with their spending in the next few year as currently the amount of new borrowing by the country is up to $7 trillion.
Another factor that need to be considered according to Forbes, is how the government will tackle the health care and immigration issue as this will determine politic stability in the country and help to make sure that the economy will continue to grow.
The global economic worries occurred after China decided to devalue their currency despite their report saying that the country's economy is growing at 7 percent this year. However, the move might also occurred because of the sharp decline in the China's stock market after it had increased 150 percent in just 12 months, according to The Guardian.
The move had caused all other currency to be weakened against U.S dollar, a situation which could hurt US export industry as trade between the US and these countries could decrease.
Besides China, the European debt crisis is also taking its toll against US economic because the European countries are the main consumer for US export good. Hence, there is a direct relation between Europe problems with the US. However, US is still in good terms despite the problem with their neighbours.
This is because, according to the 2011 International Monetary Fund data, Europe contribution to the global demand is low. The nominal GDP of all Eurozone countries could not match with US as their GDP is only around $13 trillion compared to $15 trillion.
Latest market news showed that Dow fell 1,089 points in just a few hours following China's stock market sell out. However despite the early sharp fall, S&P 500 managed to close higher last week when it is up 0.9 percent for the week.