infoTECH Feature

October 01, 2012

Business Activity Contraction for First Time in Three Years in the U.S.

The announcement of a business contraction in the U.S. is the first one in three years adding fuel to the economic crisis currently taking place in many countries around the world. The news comes from the Institute for Supply Management-Chicago Inc., saying its reading fell below 50 at 49.7 for the month of September – down by 3.3 from August.

Expansions and contractions are indicated by a reading of 50, and when it is lower than 50, there’s a contraction.

Fiscal policies dictate how the economy grows or contracts and countries around the world have their own agendas when it comes to what is best for them. These policies affect manufacturing and rate of growth, and in a global economy every policy will eventually affect everyone to a certain degree.

In order to stop the contraction, the Federal Reserve announced more measures to encourage the growth experienced in the past three years. It will purchase $40 billion of mortgage debt a month in order to lower unemployment and keep the growth moving forward.

The Chicago index is used by economists to determine the health of manufacturing not only in the U.S., but around the world. The reading of the index gives a strong indication in the overall growth of manufacturing. Weakness in manufacturing is an indication of low spending confidence by companies because they don’t see demand from consumers.

Companies are spending less money on equipment and software as well as other acquisitions related to growth.

Low levels of production can be attributed to unemployment rates of more than 8 percent for the past three and a half years in the U.S. This is the longest period since WWII with this level of unemployment.

The spending total for last month rose only 0.5 percent according to the Commerce Department report, keeping pace with the annual estimate of $11.2 trillion. The jump has been attributed to increase of prices of 0.4 percent, bringing the actual spending to only 0.1 percent.

The biggest concern for Americans is the price of fuel which is taking a big bite of the family budget. The price for regular unleaded gas was an average of $3.83 until the last week of September according to AAA and as winter approach heating oil and other expenses related to energy is sure to take another bite out of these numbers.

A combination of many different factors is making it difficult to get the economies around the world from seeing any sustainable gains. This cycle will continue until the deficits of these economies are addressed with realistic solutions instead of acquiring more debt.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO Austin 2012, happening now in Austin, TX. Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.




Edited by Braden Becker
FOLLOW US

Subscribe to InfoTECH Spotlight eNews

InfoTECH Spotlight eNews delivers the latest news impacting technology in the IT industry each week. Sign up to receive FREE breaking news today!
FREE eNewsletter

infoTECH Whitepapers