Slow Growth For U.S. Economy 1st Quarter

0
15

ECONOMYIf you were feeling a bit of déjà vu Wednesday morning look no further than the latest reading of U.S. economic growth for the cause. Like the initial estimate of first quarter 2014 GDP, the first reading says the economy grew in Q1 2015 — but very, very, very slowly.

On Wednesday, the Bureau of Economic Analysis released its advance estimate of real gross domestic product for the first quarter of this year— covering January, February and March. The release showed output in the U.S. increasing at a rate of 0.2%. This is a huge deceleration from the fourth quarter 2014 when real GDP gained 2.2%. Economists on average were anticipating growth of 1% in Q1.

Last year the GDP reading was ultimately revised to negative 2.1% then economic growth rebounded sharply in the second (4.6%) and third (5%) quarters.

“We believe weakness was grossly exaggerated and there will be significant catch-up in Q2, but, of course, that remains to be seen,” wrote High Frequency Economics’ Jim O’Sullivan, who had anticipated 1.3% growth, in a note following the release. “Apart from fundamental slowing and normal volatility, possible factors include harsher-than-usual winter weather, port delays and seasonal adjustment problems relating to Q1 specifically. More fundamentally, lower oil prices account for the plunge in the mining component of business investment in structures, although we think the positive effects of lower oil prices will ultimately offset the negative effects. ”

Despite the sharp deceleration in Q1, we remain upbeat about the outlook for growth in the U.S. We expect the economy will rebound in Q2 and beyond, similar to last year. Consumption and housing have already shown signs of a rebound. Trade is normalizing as port disruptions wane. In the second half of 2015, the negative drag from business investment associated with the collapse in oil prices will wane and should be more than offset by the positive boost to growth from lower energy costs (as the models have long predicted).”