Signs of Life in U.S. Economy Bring on a New Uncertainty

(Globe and Mail – Kevin Carmichael)

The world’s largest economy has a pulse.

A series of indicators over the past month is causing forecasters to take a more optimistic view of the prospects for the United States, and, by extension, the country’s many trading partners, including Canada, where stocks rallied yesterday on the possibility of stronger demand south of the border.

The U.S. Federal Reserve’s chief policy makers are the latest to shift their tone, concluding at the end of a two-day meeting yesterday that the “pace of economic contraction is slowing.” Their assessment followed a prediction by the Paris-based Organization for Economic Co-operation and Development that U.S. gross domestic product would expand 0.9% next year, a meagre result, but better than the group’s March prediction that next year would bring no growth.

The emerging consensus that the worst is over for the country that caused the financial crisis is bringing about a new question: What now?

The Fed conceded in its statement that “economic activity is likely to remain weak for a time,” a reality that will force policy makers to remain on guard because hundreds of billions of dollars in public spending is still the biggest source of demand. Read the complete article here.