

The US economy is poised on the edge of a recession, despite strong intervention by the US central bank and Treasury. ECONOMIC GROWTH

In the past few years the US economy has been growing strongly. But recent troubles in the housing and credit markets have hit it hard, with growth slowing sharply at the end of 2007. Economic forecasts suggest that the US growth in 2008 could be negative, with a mild recession in the first half of the year, and only very slow growth in 2009. INFLATION

The US economy is also facing significant inflationary pressures because of record oil prices which have pushed up the price of petrol and heating oil. While the US central bank, the Fed does not have an explicit inflation target, inflation above 2% is normally enough to set off the danger signals. UNEMPLOYMENT

The economic slowdown has led to gradual rise in unemployment rate, and the economy has been losing jobs in the last few months. Unemployment was already higher than it was at the end of the last boom in the l990s. BUDGET DEFICIT

The US Treasury has begun paying out over $100bn in tax rebates to help boost economic growth. But the package will double the size of the US deficit, which will also be hit by the economic downturn. In the longer term, costs will rise as more people claim social security and Medicare payments as the Baby Boomer generation reaches retirement. COLLAPSING HOUSE PRICES

At the root of the problems in the US economy is the collapse of the housing market as foreclosed properties and unsold new build homes flood the market. Nationwide, US house prices are dropping for the first time since the Great Depression, and the rate of contraction is still accelerating. And with people unable to borrow more against the value of their homes, it also has an impact on the real economy.



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