EconomicCrisis.US

A top U.S. Federal Reserve official warned Thursday the U.S. economy is close to sliding toward Japanese-style deflation, and the current policy of keeping interest rates at near-zero for an extended period might exacerbate matters.

James Bullard, president of the Federal Reserve Bank of St. Louis, said in a policy paper the best way to avoid such a dangerous outcome is for the U.S. central bank, despite its already bloated balance sheet, to buy up U.S. Treasury bonds.

“The U.S. is closer to a Japanese-style outcome today than at any time in recent history,” Mr. Bullard said.
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The U.S. economy continued to grow during the second quarter, but the pace slowed even more than economists were expecting, according to a government report Friday.

Gross domestic product, the broadest measure of the nation’s economic activity, rose at a 2.4% annual rate during the three months ended June 30, the Commerce Department said.

The sluggish pace is down from the upwardly revised 3.7% growth rate in the first quarter, and missed economists’ forecast for a 2.5% increase.

Still, the figure marked the fourth straight quarter of growth and confirmed economists’ views that the recession that began in December 2007 ended at some point in the middle of 2009.
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Overall economic activity in the US improved in recent months but certain districts witnessed slowdown, according to the Federal Reserve.

The apex bank also noted that manufacturing activities slowed down in certain parts of the country.

These comments are part of the Federal Reserve’s latest Beige Book, which provides a snapshot of economic activities in 12 states, for which data was collected on or before July 19.

Noting that economic conditions continued to improve in recent months, the central bank said that two districts Atlanta and Chicago saw slowdown in economic activity.
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The U.S. economy is out of the ditch. But is there enough gas left in the engine to reach highway speed?

The recovery faces a crucial test over the next couple of months: Either it will pick up vital momentum from increased consumer spending and investment or stall out, dipping into a period of anemic growth — or perhaps even another recession.

Forecasters knew this inflection point would arrive, a moment when consumers and businesses must take over for government stimulus spending and the rebuilding of inventories.
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