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The Fed Releases First Quarter GDP Numbers

By on April 29, 2015
first quarter gdp

The Fed Releases First Quarter GDP Numbers

first quarter gdp

Indicators show that the U.S. economy has slowed significantly in the first quarter GDP report as cold weather, a strong dollar and shipping setbacks dampened activity.

 

The nation’s GDP, the value of goods and services produced in the U.S., has expanded at a seasonally adjusted annual rate of 0.2% in first quarter, the Commerce Department said Wednesday. That’s way down from 2.2% in the fourth quarter.

 

The report was the federal government’s first estimate of first-quarter GDP. Two revised estimates, based on more complete data, will become available in May and June.

First-quarter growth was substantially less than the 1% expected by experts and economists.

 

Analysts claim the slowdown largely reflects temporary factors, such as harsh weather conditions nationwide and a labor dispute at West Coast ports that restricted exports and delayed deliveries to factories and retailers.

 

Other negative effects could linger, including a strong dollar that’s making U.S. goods more expensive for foreign customers and a pullback in energy company investment amid a plunge in oil prices.

 

Domestic investment in business fell 3.4% after increasing 4.4% in the previous quarter as the strong dollar hurt manufacturers’ sales.  And investment in non-residential projects plunged 23.1% in the quarter, in large part a consequence of the oil price dropping, as energy companies sharply reduced the number of oil drilling rigs.

 

Exports dropped 7.2% as manufacturers lost sales to other countries with more favorable currency exchange rates according to the first quarter GDP.

 

Consumer spending, which makes up more than 2/3 of economic activity, also slowed, growing 1.9% compared with 4.4% in the fourth quarter. Bad weather kept

consumers at home during usually busy shopping seasons.

 

And government spending declined 0.8% as defense and state and local outlays all fell.

Many economists expect improving weather and faster wage growth to encourage consumers into spending the savings they’ve pocketed from low gasoline prices, helping the economy grow 3% for all of 2015. That would be the economy’s best showing in the nearly 6-year-old recovery.

 

“There is plenty of evidence to suggest that the first quarter slowdown represents a temporary blip, and that growth will rebound in the second quarter,” says Chris Williamson, chief economist of Markit.