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Second-Half GDP Not Looking So Good
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Second-Half GDP Not Looking So Good

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Friday, 07 August 2015 07:28 AM Current | Bio | Archive

More economic data is pointing toward mediocre economic growth for the U.S. in the last half of 2015.

The Federal Reserve forecast in March of 2013 that GDP growth for 2015 would be 3.3%. By the end of 2014, that forecast had steadily declined to 2.8%. The first half of 2015’s GDP came in at 1.45% which was substantially helped by the first quarter being revised upward from -0.9% to +0.6%. To make the Fed forecast, the economy would need to grow 4.15% during the last half of 2015.

However, recent data suggests that economic growth for the second half of 2015 will be much less than needed.

For example, the Institute for Supply Management’s manufacturing index fell unexpectedly to 52.7 in July. The consensus forecast was a rise to 53.7 from 53.5 in June. Note that this falls considerably short of last year’s July number of 57.1. Construction spending rose a scant 0.1% in June after rising 1.8% in May. And recently released wage data show the smallest increase in 33 years.

The most troubling data point is slowing consumer spending. After increasing a robust 0.7% in May, consumer spending rose a meager 0.2% in June. This disappointing number is consistent with the Conference Board’s Consumer Confidence Index slipping to 90.9 in July. The reason why consumer spending is so important to U.S. economic growth is because it accounts for 70% of all economic activity.

The U.S. economy continues to grow but just at a slower than forecast pace. There certainly are positive economic data points but the balance in the data has begun to shift toward more bad than good data.

Key drivers behind these disappointing numbers are the consequences of a strong dollar, softening global demand because of a weakening global economy, and cut backs in the energy sector due to low oil prices. None of these reasons are expected to change much in the second half of this year.

So expect the second half of the year’s GDP growth to be somewhere south of 4.15%. That means annual GDP growth will likely underperform both the IMF forecast of 2.5% and the Fed forecast of 2.8%. While the economy has been predicted to take off since 2012, this will make 3 mediocre years going on four. This may be the new normal for until new policies change the circumstances.

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Ed-Moy
More economic data is pointing toward mediocre economic growth for the U.S. in the last half of 2015.
gdp, economy, invest, growth
392
2015-28-07
Friday, 07 August 2015 07:28 AM
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