Gold: Harsh winter conditions at the start of the year and a stronger U.S. dollar have helped to weaken U.S. economic growth more than expected, as Department of Commerce releases the advance gross domestic product report for the first quarter.Wednesday, the department said the first estimate of first-quarter GDP rose 0.2% on a seasonally adjusted basis, down from final fourth-quarter growth of 2.2%. Economists were fairly pessimistic ahead of the report as consensus forecasts were calling for economic growth of 1.0%.
"The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and private inventory investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and state and local government spending," the report said.
Economists have been more pessimistic about growth in the first three months of the year as most of the country was once again faced with harsh winter conditions, they have noted that most of the data since the start of the year has been weaker than expected. Many have also noted that a strong U.S. dollar has dramatically reduced the country’s exports, hurting the manufacturing sector.
Andrew Grantham, senior economist at CIBC world Markets, said there were not a lot of positives in the first quarter data and might impact the Federal Reserve’s economic outlook, which could be reflected in its monetary policy statement, to be released later today.
“But even accounting for the one-off factors growth during the quarter is likely weaker than the Fed’s March assessment of growth when they said it had “moderated somewhat”, which could be reflected in a further change in wording this afternoon. One slight positive was consumer spending, which despite slowing from the heady heights of Q4, was slightly above expectations,” he said.
The department said that inflation continues to fall as the price index for gross domestic purchases decreased by 1.5% in the first quarter of 2015, down from a 0.1% decline in the fourth quarter of 2014. Excluding volatile food and energy costs, the price index increased 0.3%, down from the fourth quarter’s rise of 0.7%.
Consumer spending remains the one bright spot in the U.S. economy, coming in slightly above lowered expectations. According to the report real personal consumption increased 1.9%, in the first-quarter, down from 4.7% in the fourth quarter. Durable goods increased 1.1% in the first three months of the year, down from 6.2% reported in the fourth-quarter.
As expected a weak manufacturing sector is reflected in weak exports, the report said that exports fell 7.2% in the first quarter, down from a 4.5% increase in the fourth quarter. Imports, which are a negative on GDP growth, increased 1.8% at the start of the year, down from 10.4% reported at the end of 2014.
Real federal government spending increased 0.3% in the first quarter, up from a drop .f 7.3% in the fourth quarter.
Non residential fixed investments fell 3.4% in the first quarter, down from a 4.7% increase seen in the fourth. Investment in nonresidential structures fell sharply by 23.1%, compared to a 5.9% increase in the fourth quarter. |
