The Major Threats for US Economy

A survey conducted by “WSJ.com” to 54 economic forecasters found the major threats causing US economy to grow slowly. 20 out of 54 economic forecasters responded that soft capital spending is the number one threat, and other economists responded that inflation and oil prices are the major threats (Phil Izzo and Dean Treftz). According to the article, “Economy Enemy No.1: Soft Capital Spending” by Phil Izzo and Dean Treftz, businesses such as Advanced Micro Devices Inc., Tecumseh Products Co., Ralcorp Holdings, and Auto-part makers plan to decrease their capital spending due to factors such as debts or new projects in process. In the other hand, another survey conducted by FoodProcessing.com to 26 food companies found out that six companies are also decreasing their capital spending, but the rest are increasing it. Some businesses increasing their capital spending include Wal-Mart and 3M Co. The economists that responded to the WSJ.com survey concluded that unemployment would increase from 4.5% to 4.8% due to the threats that are causing US economy to grow slowly.

Another survey conducted to 60 financial executives in manufacturing companies concluded that 55% of the financial executives expect that capital spending for this year will increase and 13% expect a decrease. A similar survey was conducted 6 months earlier to the same financial executives and at that time, 44% predicted an increase and 31% a decrease. (Economy Enemy No.1: Soft Capital Spending)

Capital spending, inflation and oil prices are causing US economy to grow slowly, but according to the article, economists alleged that another threat that is causing economy to grow slowly is consumer spending. But I think that another major threat that we should worry about is the war against Iraq and the possibility of terrorist attacks.

I think that consumer spending is the major threat for US economy because if people don’t buy, economy will go down. In the other hand, if business cut down their capital spending, we as consumers are affected. And I think that one of the reasons businesses are decreasing their capital spending is because low demand, no re-investment and low earnings.

Izzo, P. and Treftz D. (2007) Economy Enemy No.1: Soft Capital Spending. Retrieved April 14, 2007, from http://online.wsj.com.