US growth data for the fourth quarter is better than expected, although the economy grew slightly less than the previous quarter at 2.9%. However, according to economist Edin Mujagic, it is worrying that much of this growth is due to increased public spending. “This isn’t sustainable for long. You can’t keep spending as an American government all the time.”
The US economy was hit hard last year by high inflation, rising interest rates and grim consumers. If these factors are extended to next year, it can be assumed, according to Mujagic, that growth will slow down somewhat this year. “But if that doesn’t get too much, you can talk about a well-functioning American economy.” A few months ago there was still concern that a recession was inevitable, but the figures now indicate that it might be possible to avoid that recession.
Ensure
Still, there are some troubling indicators when you look at where exactly the growth is coming from, Mujagic says. ‘Companies have stockpiled, for example, as a precaution. In this way you carry on part of the growth». The fact that much of the growth is due to increased government spending is also not a good sign, he says. ‘That’s where 0.7% of the growth comes from, about a quarter. It’s not sustainable for long, you can’t keep spending as an American government. As they spend more than they take in, the budget deficit and public debt will increase. This could have negative consequences in the future.’
The Inflation Reduction Act, a large package of subsidies, is also paid by the government. “If this is successful, it will lead to companies investing more,” Mujagic explains. “The contribution of those extra investments will compensate for the damage done to the public sector. Early indicators indicate that this could be a success.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
