US Economy mixed bag – Factors that made it stagnant

All the recent reports about the US economy have confused everyone because of the inconsistent information mentioned on them. Economists have found that people expect to see an improvement in the economic conditions of the country shortly. However, they are jittery to loosen their purse and return to their old spending habits. Moreover, there is a sharp reduction in job loss but the unemployment rate remains the same. As a result, people have become very cautious about their finances to avoid falling into debt problems. This in turn reduced the demand for debt relief services like debt consolidation loans or programs, debt settlement, etc.

Apart from that, the real estate and the securities market have started to rebound to its robust form. Still, this has not translated into salary hikes even while inflation touches new heights. A slew of factors have influenced this status-quo position of the economy.

Major factors for slowed growth of the economy

Here are some major contributing factors that slowed the economy’s growth:


There is a sense of confidence amongst the masses regarding the financial stability of the economy, even amongst several dampeners. For instance, the index of consumer confidence has reportedly touched its 7-month high in this fiscal year of 2012. Moreover, the University of Michigan conducted a survey that showed the 2nd highest growth in consumer sentiment as compared to the last 5 years. However, businesses need to generate more jobs to enable people to leverage their confidence so that they can put the money back into the economic system through increased spending.

Real estate

Following the burst of the housing bubble, the real estate sector was unable to contain its downslide. In such a situation the Federal Reserve initiated its QE3 bond-buying program with a budget of around $40 billion to prevent the worsening situation from becoming the worst ever. The index of the Standard & Poor/Case-Shiller has said the housing market is gradually on the rise. As per the forecast, the near-ground-level mortgage rates are expected to be the same in the approaching months.

As a result, the confidence of the real estate developers has increased and so, they may hike the number of projects as of now. Though the market is becoming conducive to buying properties, most people do not have requisite credit scores or are low on mortgage affordability to get them.


Amongst the business fraternity, the confidence level is somewhat negligible as compared to the consumers. Most of the top-grade executives of the biggest US corporations have revealed that post 2008-recession their approach towards the economy has remained negative. They also pulled in the existing eurozone debt crisis as a reference for their shattered confidence. In recent months, the commercial aviation industry is predicted to perform better. However, investors’ confidence says that the US economy may falter in the year 2013 due to fiscal cliffs. The cause for the fiscal cliff is the hike in taxes which forces businesses to cut down on expenses.

The US economy has been indeed performing quite awkwardly in this current economic scenario. The monthly household expenses have soared in the past few months because of rising food and gas costs. Therefore, economists predict slow growth in consumer spending in case there is a lack of proper plans to mitigate the growing inflation from creating further havoc on the citizens’ lives. Moreover, people are in great need of salary hikes to pay for their daily essential expenses.