Thursday, April 30, 2015

Making Sense of Weak Economic Growth in Q1 of 2015

On Wednesday morning, the new GDP figures for the first quarter of 2015 in the US became available...and we managed a whopping 0.2% growth in those first three months of the year. The writer of the article gives two reasons for why he believes the economy performed so sluggishly.

First, he think that our uncommonly cold and snowy winter was bad enough to affect consumer spending (a.k.a. it was so cold that no one wanted to go shopping and instead tried to make do with whatever they had at home). To me, this isn't the most convincing of answers, but the author is quick to point out that exactly the same thing happened last year. Q1 in 2014 was very slow, but growth doubled (to 4.8%) in Q2, and remained the same for Q3, ending in a year, that from an economic standpoint, wasn't nearly as bad as Q1 had foreshadowed. Hopefully, we can experience similar growth through the rest of 2015 as well.

The author's second reason for slow growth was the value of the American dollar. Over the last several months, the dollar has become much stronger compared to several other powerful currencies, and thus, has increased the price of our exports. Our export figures strongly reflect this increase in price, as they fell 7.2% annual rate (contributing to overall GDP by -1.25%). Also, very low gas prices through the latter months of 2014 were hoped to spur consumer consumption into overdrive, however, it didn't. And this continues to be a mystery to economists.

So, what do you guys think of our slow growth to start out the year? Any ideas on what we can do to improve it and hit the sunny projections that were being forecasted at the beginning of 2015? Also, do you think the weather has as big of an impact on the economy as the author seems to think?

1 comment:

  1. Although the overly strong dollar is concerning, I'm guessing that the slow growth is just an aberration. I think that growth will expand throughout the rest of the year as it did last year with improved weather. Two weeks ago I blogged about the consumer sentiment index reaching a post-crisis high this month which seems like a good sign. Hopefully things will improve in Q2.