Data released by the Bureau of Economic Analysis on Wednesday in the United States showed that first quarter GDP grew at only 0.20 per cent. Similar to the previous corresponding period, first quarter GDP growth is significantly below trend lines. Economist had projected the growth rate to come in at 1 per cent in the first quarter. The 0.20 growth rate came in significantly below the 4Q2014 growth rate of 2.2 per cent. The primary contributors to the slowdown were attributed to severe weather, the high valuation of the US dollar that inhibited exports and a steep drop in investments by US energy companies amid a downturn in oil prices. As oil prices plummeted, many US hydraulic fracturing companies are finding it difficult to maintain the high cost operations of shale exploration.
Similar to last year’s first quarter growth reports, many analysts remain optimistic about future growth. “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. In 1Q2014, GDP fell 2.1 per cent, but then rebounded significantly by 4.6 per cent in second quarter and 5 per cent in the third quarter. Recently in the US, first quarter growth has been inhibited by severe weather patterns, but recovered later in the year after weather conditions improved. Other analysts have confirmed this assessment. RBS senior economist Michelle Girard commented, “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.
Author: Simon Herrmann
Apr 30, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.