The U.S. economy grew 3.4 percent in the third quarter for the first time in more than a year, indicating the worst recession since the 1930s may be coming to an end. But economists have also warned that the government-led growth must be replaced by growth led by private consumption in order for the recovery to be sustained.
The U.S. Commerce Department reported last Thursday that the nation's gross domestic product rose at a 3.5 percent annual rate in the third
quarter, the first increase after four consecutive quarters of contraction.
"I think it's very good news. It's in line with our expectations at Standard Chartered," said Gerard Lyons, chief economist at Standard
Chartered Bank in a recent exclusive interview with Xinhua.
"We think the U.S. economy will grow very strongly for the next 6 to 9 months," largely due to the fiscal stimulus and low interest rate, he said.
His forecast was echoed by Fred Bergsten, director of the Peterson Institute for International Economics, a leading U.S. think tank based in Washington D.C..
"I'm quite optimistic about the outlook of the U.S. economy over the next year or so," Bergsten told Xinhua. "I think we'll go up about 4 percent through 2010."
But many economists also worry that the effect of the government-led growth will be short-lived and that the next few quarters may see sluggish growth or even a second dip.
Mark Borthwick, director of U.S. Asia Pacific Council, noted that the U.S. economy would continue to expand, but at a slower pace. "The economy is strong enough to keep going, but not strong enough to grow fast," he said.
"So the question whether we have a V shape recovery is still not answered," Borthwick told Xinhua. "I always hope for a V shape for recovery,
but it's very possible it will be a U shape."
Among the hurdles to sustained and robust growth is the U.S. unemployment rate, which stands at 9.8 percent now, the highest level in 26
years.
"We've had a technical end of the recession, which is something that economists and bankers like to talk about," said Robert A. Dye, senior
economist at PNC Financial Services Group.
"But it's not going to feel like we've had an end to the recession on Main Street until unemployment starts to go down," he said.
For the expansion to be sustained, private consumption must replace government spending, which is the biggest challenge faced by the U.S.
economy, economists warned.
Lyons said the big challenge is that the current recovery is driven by the government. A U.S. recovery is normally not driven by the government, but spurred by the private sector.
"I'm still concerned that the private sector will not step in so the stimulus will boost economy over the next few months and into the early part of next year, but it will phase out because the private sector will remain
cautious and U.S. consumers are still worried about jobs and about their wages," Lyons told Xinhua.
"So it's a recovery, but it's not a typical U.S. recovery, a recovery driven by the policy stimulus and we need to see the private sector stepping in for the recovery to become truly sustainable," he said.
But in Borthwick's opinion, even private consumption is not the best for the U.S. economic model.
The U.S. economy is largely driven by consumption expenditure, but this kind of economic growth model also leads to overconsumption and credit debt which are the roots of the current financial crisis.
"To return to growth without being driven so heavily by consumer-led growth, it's got to grow through exports, its own manufacturing and its own
investment," said Borthwick.
"The recovery has to be sustained under a new structure of growth rather than what we had before," he stressed.
Meanwhile, some economists have warned that the U.S. is entering a new crisis due to the government-led growth, fueled by huge budget deficit.
"The United States is headed toward a new financial crisis," said Allan Meltzer, professor of political economy at Carnegie Mellon University.
"A steady, committed policy to reduce future inflation and lower future budget deficits will avoid the crisis that current policies will surely
bring," he said.
According to him, the U.S. economic growth will remain at a slow rate, below the average of the last 30 or 40 years. Besides, there will be a
period of very fluctuating growth ahead.
"It would be good in the third quarter, maybe not so good in the fourth quarter. It will be up and down but along a very low growth rate," Meltzer told Xinhua in a recent interview.