Is the economic recovery sustainable?

Economic data for U.S. economic prospects seems quite positive during the fourth quarter; however, many analysts and investors alike are beginning to wonder: is U.S. economic recovery sustainable?

Amid the slew of economic data that seems to point in many different directions, many investors have been left confused about what will happen in the next coming month in The United States. The U.S. saw strong employment growth and spending during the winter only to see these gains reduce during the first quarter. The U.S. Payrolls report was a major disappointment to investors. After that came recurring worries about other global economies, the China,  E.U. and Spain included.

Amongst these worrisome reports, there have been some positive earnings reports for some major aluminum producers such as Alcoa and many other large companies in different sectors. There have also been strong gains in the retail sales growth area.

With these mixed signals, many investors were beginning to wonder if the Federal Reserve will step in and initiate a third round of quantitative easing. However, most experts believe that this will not happen for some time.

While analysts were trying to understand what these indicators meant for the economy, the newest reports only add to the pessimism. The New York manufacturing report showed a decrease in manufacturing; Philadelphia reported a similar situation.

In addition to this, reports on home sales and jobless claims were not encouraging. Existing home sales fell by 2.6 percent to  an annual rate of 4.48 million; analysts were looking for figures around 4.6 million. The jobless claims, however, fell by 2,000 to 386,000; however, the four week moving average indicates an increase of 5,000.

Most economist believe that it is too early to make any conclusions at this point.

Patrick Newport, an economist at IHS Global Insight, says “it’s too early to tell” if the recovery is in trouble. “We need more data.”

“QE3 is still a possibility,” Newport says, referring to the Fed’s quantitative easing policies, “but it’s not something that will be taken up at the next meeting.”

The Fed will meet on Tuesday and Wednesday.

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