Economists urge U.S. to replace government-led growth

by Xinhua writer Liu Hong

WASHINGTON, Nov. 1 (Xinhua) -- 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.

DESPITE GOOD NEWS, WORRIES LINGER

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 next6 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.