Us Economic Report

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| U.S. ECONOMICS REPORT 2012INSTRUCTOR: MS. MAI THI HOANG YEN | | | | | | U.S. ECONOMICS REPORT 2012INSTRUCTOR: MS. MAI THI HOANG YEN | | | | | MACROECONOMICS Developments in 2011 and the Near-Term Outlook Consumption and Saving Consumer spending- a category that makes up about 70% of GDP -rose moderately in 2011, as credit conditions continued to ease, household liabilities fell relative to income, and the labor market continued to recover. Gains over the year were uneven, however, in the face of upheavals at the beginning of the year. Partly reflecting these shocks, real consumer spending rose at an annual rate of only 1.4% in the first half of 2011, having increased more than 3% at an annual rate in the second half of 2010. The slowdown in spending growth would have been more severe in the absence of the workers’ payroll tax cut, which offset oil price shocks early in the year and supported household consumption. The disturbances that slowed consumption growth in the early part of the year proved transitory, and their effects dissipated in the second half of the year; oil prices stabilized over the summer, and by the fourth quarter, production (and availability) of motor vehicles had returned to levels that prevailed before the earthquake in Japan disrupted supply chains. The second half of 2011 brought new challenges, however. Concerns about the weakening pace of growth in several industrialized economies - most notably in Europe - escalated during the summer, and the contentious debates held in Congress over raising the statutory debt ceiling unsettled equity markets. The stock market and consumer confidence both fell in the third quarter before rebounding in the fourth quarter and early 2012. Despite these headwinds, the growth rate of real consumer spending picked up in the third

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