Thursday, July 16, 2009

Revised Fed predictions for GDP in 2009, 2010 and 2011

The US's central bank (the US Federal Reserve Bank) in its revised predictions says that the US economy will contract by 1%-1.5% this year. That is a better forecast that the May one (-1.3% - -2%).

For 2010, it now forecasts growth by 2.1% to 3.3% (May forecasts: 2% to 3%).

But the Fed now warns that US unemployment could rise above 10%, as high as 10.1%! In June, unemployment climbed to 9.5%, the highest rate in 26 years (1983)!

In its analysis of the US economy, the Fed points out that: consumer spending appeared to have stabilized since the start of the year, sales and starts of new homes were flattening out, and the recent declines in capital spending did not look as severe as those that had occurred around the turn of the year. Moreover, it seemed likely that economic activity was in the process of leveling out, and the considerable improvements in financial markets over recent months were likely to lend further support to aggregate demand.

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