Economic Analysis On Economic Growth

1593 Words Apr 8th, 2015 7 Pages
Economic Analysis

Economic growth has been solid in the past four years driven by historically low interest rates. In February 2006, the unemployment rate in was Nova Scotia is 9.5%. The average income is $33,533. Average GDP growth in Nova Scotia has been about 2%, and the inflation rate has been about 2.5%.

Strong economic growth has resulted in higher and increasing interest rates; which slows down the economy, especially the interest rate sensitive real estate industry; as mortgage rates increase, mortgage payments increase; and so houses become less affordable at the same prices. This puts a pressure on house prices to decrease, and so there is a possibility of a crash in the real estate market. A 1% increase in the mortgage rate increases monthly mortgage payments on the proposed property by $105; that is $1,260 per year, and interest rates are likely to increase more than that in the near future.

Increasing energy prices also decreases the ability of households to spend on housing, and makes home ownership less attractive, and rent more attractive, to avoid paying high heating bills.

Economic indicators show that the economic cycle could be at a peak, and the economy is slowing down. Wages are not increasing, and the unemployment rate is at its natural rate, so inflationary pressures are not likely to increase. Higher energy prices are more like a tax on people, as it decreases their discretionary income, and rising interest rates, at record household debts posses…
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