Growth in American economy

The current situation in American economy is not very optimistic as many specialists believe. They stand on the ground that there are negative trends that cannot provide a stable economic growth to the economy. However, it is not so bad in actuality and there are still quite real chances for economic growth that could be observed within 2005-2006.Firstly, it should be said a few words about pessimistic view on the development of American economy and the reasons for such pessimism. In fact the reasons lie on the surface, among them may be named increasing interest rates that threatens to the housing boom and it also forces government to moderate spending, the stock market is not a source of optimism anymore and the consumers expectations are very pessimistic. Furthermore, the situation is severely aggravated by the energetic crisis and unparalleled growth of energy inflation that influences the inflation at large. And the situation in the international arena is also quite disturbing, especially American participation in international war conflicts, earlier in Afghanistan and now in Iraq, where despite the declared end of the war the situation is still unstable. Moreover, the US economic policy is forecast to become more restrictive during 2005-2006. The Federal Reserve is supposed to boost its target fed funds rate to 4.0% by the end of 2005 and to 4.5% in 2006 and the 30-year mortgage rate would rise to 6.5% by the year-end 2005 and to 7% a year later. However, not everything is as bed as one may think. It should be pointed out that in the root of the critical situation in American economy is the international situation, namely international trade and the situation in the international energy market. Unfortunately, recently the objective problems in the economy have aggravated by problems resulting from natural disasters such as the recent hurricane Catherine in the US. But it is obvious that such problems are temporary and the consequences of natural disasters will be overcome. The similar forecast is traditionally made in relation to energy market, for instance in “2005-2006 Economic Forecast and Industry Outlook” it is estimated that “energy prices will stabilize or retreat somewhat” (2005, p.120) in the forecast period. Partially it would lead to the diminishing of the inflation which is forecast to be around 2.3% in 2005 and 2.4% in 2006 compared to 2.7% in 2004.Another significant factor, which could contribute to the overcoming of elements of crisis in American economy, is the level of unemployment. According to specialists, employment will increase nationwide in 2005-2006, and the general US unemployment rate will decline gradually, falling to 5.0% by the end of 2005. Furthermore, in order to stabilize the situation in the stock market, the federal budget deficit should be at least stabilize or even decline. It is also forecasted that federal outlays will continue to escalate, led by higher defense bills and income and corporate profit tax revenues are growing strongly now that the economy is back on track.Thus, talking into consideration all above mentioned, it is possible to conclude that in 2005-2006 American economy, being in a difficult situation, will continue to grow due to the positive factors mentioned above and the growth will be about 3.5% or so that is quite a good perspective, especially if the problems American economy faces are taken into account.