U.S. Economic Growth Remains Solid Despite Not Keeping Pace


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The U.S. Bureau of Economic Analysis released its preliminary estimate of 4th quarter results and it shows that economic growth slowed considerably from last quarter’s torrid pace of 5 percent to 2.4 percent.  This estimate should be viewed with caution because it is based on incomplete data and further revisions will be released in the future.  Having said that, it still remains a decent figure and is more in line with what we experienced throughout the year.  If this quarter’s growth were to receive a grade, it would be C+ without a curve, but an A with a curve.

What to smile about 4th quarter growth:

  • Consumer spending picked up, which can be explained by low gas prices that freed up more money to spend in other areas.
  • Business spending also grew, particular in intellectual property and residential.

What to frown about 4th quarter growth:

  • A weakening global economy and resurgent U.S. economy drove down net exports.
  • Federal government spending contracted by the largest margin of the year.
  • The pace of equipment spending dropped and overall growth in fixed investment and structures grew at a slower rate.

Overall, we should still be encouraged by these numbers.

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U.S. Economy Picks Up Steam In 2nd Quarter


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The U.S. Bureau of Economic Analysis released 2nd quarter data and it showed better than expected results.  While many expected a significant improvement from the dismal 1st quarter, a growth of 4 percent in real GDP was larger than expected.  Given their propensity to revise economic data at later dates, we should be cautious in relying on it.  For instance, they again revised the economic contraction of last month from 2.9 percent to 2.1 percent.  However, this is certainly evidence that the economy has rebounded from a terrible first quarter.

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Some of this rise can be attributed to severe weather in the previous quarter where consumers stayed in, but started to make up for lost time by resuming their spending habits.  This explained the healthy boost of 2.5 percent between April and June in consumer spending.

Business investment was also healthy.  Gross private investment rose by 17 percent with most of the rise occurring with equipment.  This is a significant improvement over the last quarter where investment declined by 6.9 percent.  These figures are volatile, but we can take comfort that investment spending has risen in five of the last six quarters.

This improvement is consistent with my July 2nd post entitled, “Don’t Worry, Be Cautiously Happy”.  The combination of an improving labor picture and rising manufacturing activity are boosting hopes of a more robust recovery.  However, we are not out of the woods yet and should be concerned with the various world crises that can hamper U.S. economic growth in the future.

Don’t Worry, Be Cautiously Happy About U.S. Economic Growth


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The U.S. Bureau of Economic Analysis provided yet another revision to their first quarter numbers.  In a third revision, we now learned that the economy declined by 2.9 percent, as measured by real gross domestic product (real GDP).  That would rate as the second sharpest decline during the Obama administration and that worse decline was when we were in the midst of a steep financial crisis in the first quarter of 2009 when the economy contracted by 5.4 percent.  Even though that is a depressing rate, many analysts still believe that it will be a temporary bump.

Here are the three reasons why we should not worry:

  1. Weather was particularly bad across the U.S., so we should see a healthy rebound during second quarter.
  2. Job growth remains healthy with June private sector job growth estimated at 281,000, which would be the highest since November 2012.
  3. U.S. manufacturing continues its healthy trend in 2014 with its latest reading at 55.3.  (Note:  Any number above 50 represents expansion)

Take a deep breath and take comfort that the U.S. economy should rebound strong in the 2nd quarter.  Having said that, our economic recovery remains relatively soft with  the International Monetary Fund downgrading U.S. economic growth prospects for 2014 from 2.8 percent to 2 percent.