The US economy has taken economists by surprise by posting growth of 2% for the third quarter giving the US Dollar a boost against its most traded counterparts.
A late burst of consumer spending is being touted as the reason for the strong figure as it offset the first cutbacks in investment by cautious businesses. Despite the welcome news that the world’s biggest economy is heading in the right direction, investors warned that the figures would offer little cheer to the White House as they are still far short of what is needed to put a dent in unemployment. A pace in excess of 2.5pc is needed over several quarters to make substantial headway cutting the jobless rate.
Economists had been predicting a rise of 1.9% for the third quarter. Since crawling its way out of recession in 2010 the US economy has faced a series of challenges, from high oil prices to the seemingly never ending Eurozone debt crisis and now from the threat of US government austerity measures.
With around 23 million Americans out of work or underemployed, there are fears that the current pace of spending will not be sustained, especially if gasoline prices maintain their recent upward march and families get a higher tax bill in 2013.
The automatic tax hikes and government spending cuts, known as the “fiscal cliff,” will drain about $600 billion out of the economy next year unless there is congressional action to stop it. It remains to be seen whether the US will be able to sustain growth once those measures take effect.
The worst case scenario will be if it becomes apparent that the cuts will come too fast and hard resulting in a sharp contraction that could topple the world’s biggest economy into a Eurozone downward spiral. After all it’s not as though harsh austerity has been proven to work in nations such as Greece, Portugal, Spain, Italy and many others.
As of 15:00 pm
The Pound to Euro exchange rate is currently trading at 1.2464
The Pound to US Dollar exchange rate is currently trading at 1.6113
The Pound to Australian Dollar exchange rate is currently trading at 1.5538
The Pound to New Zealand Dollar exchange rate is currently trading at 1.9590
The Pound to Canadian Dollar exchange rate is currently trading at 1.6026
The Pound to Japanese Yen exchange rate is currently trading at 127.5300
The Euro to US Dollar exchange rate is currently trading at 1.2960
The Euro to Pound exchange rate is currently trading at 0.8085
The Euro to Australian Dollar exchange rate is currently trading at 1.2547
The Euro to New Zealand Dollar exchange rate is currently trading at 1.5898
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