Mercado Released [11 May 2015]: US ECONOMIC GROWTH

The US economy grew at a slower rate than what was expected, achieving a growth rate of only 0.2% for the first three months of the year. Analysts had forecast a growth rate of 1.0% for the same period. Despite the fact that the US managed to achieve a high level of growth in 2014, economists feel that the underlying economy is weaker now than it was a year ago. The underlying weakness is a result of declines in energy prices which has had a knock on effect on capital investment. A number of factors have contributed towards the dampening of growth. Firstly, the cold winter weather has prompted Americans to save more during the first three months of the year, which has directly affected consumer spending. The strong dollar has also negatively affected the US economy, leading to businesses spending less on capital goods. Weaker global growth has also dampened US GDP figures. Labour disputes are another factor that have contributed towards the weaker growth. The disruptions from the ongoing labour negotiations has led to employers not receiving their inventories in time and as a result production has suffered. The weaker level of growth, may lead to the US pushing back the start of the interest rate hiking cycle which may bode well for emerging markets.

For more on the economy read this week’s NMG Mercado here

Week 20 2015