While all concerned saw a strong increase in the U.S. economy in 2014, they are now seeing a slower pace of increase happening in the country. While the dollar is still strong, the trade deficit is coming under pressure because American goods and services are appearing to be losing their competitive edge based on the positive performance of the greenback.
On Friday, government data revealed that in October and December of 2014, analysts saw signs of slower growth taking place within the U.S. economy. The economy grew at a pace of 2.6%, which was an unexpected shock to some persons compared to its 5% growth in the past three months.
As government data information spread among investors, share prices took a dive. However, Wall Street analysts in the meantime assured the public that the slow movement of the economy might be short-lived.
Still during the holiday season, consumer spending increased big time as much spending was done on cars, clothes and so on. In the final quarter, however, the federal government’s weak spending triggered a slowdown in the country’s economic growth.
Since federal’s weak performance, Gross Domestic Product (GDP) went down below 3% for the second time in six quarters. Meanwhile, personal consumption made an astounding run by rising 4.3%, which was the best increase since 2006.
Greater consumer spending also affected the economy. Apart from buying foodstuffs, clothes and cars, consumers got a break at the pumps while enjoying lower gas prices. With low gas prices running throughout the U.S. and thus giving consumers more money to spend, much spending was done in 2014.
On the international level, the greenback played a vital role in ensuring cheaper goods being imported into the country and more expensive goods exported overseas. In 2014, since the strength of the dollar was increasing, the price of exports was also rising as Americans were getting cheaper goods to buy and import into the country. With cheaper goods entering the country, the fourth quarter saw the trade deficit end up with a subtraction from GDP increase to 1.02% points.
In 2015, while the global economy seems to be losing ground, the U.S. economy is accelerating. This makes many leaders worldwide wonder why the rest of the world’s economy is struggling and the U.S. economy is growing rapidly.
In the U.S., consumer confidence recently escalated to a high, which is the first in seven years. In addition, job prospects are improving while unemployment rate is dropping. With this news circulating the nation, economists and traders are expecting that the Federal Reserve will soon lift short-term interest rates in early June.
As the world continues to watch, powerful countries such as China, Japan and some European nations continue to battle financial setbacks by buying consumer goods with cheap money.
However, as the U.S. economy continues on its growth path, citizens are voicing their concerns as to why roads, bridges, dams and other infrastructure are remaining in disrepair. Politicians are blaming infrastructure disrepair on the $3.6 trillion shortfall remaining in the recent budget.
To make matters worse, Federal spending has plummeted 40%. Back in 1977, GDP was at 1.25%, but today it is touching 0.75%. In addition, student’s debts have reached a staggering $1.2 trillion. Furthermore, fire departments, public schools and police departments are still underfunded by the relevant authorities.
The White House is predicting a stronger growth for the U.S. economy in 2016. In a recently released White House report, it is said, “the U.S. economy has substantial room for growth, although there are factors that could limit that growth in the year ahead.”
So far, as 2015 progresses, the White House is predicting growth from the country’s 2014 fourth quarter to the end of 2015 in the range of 3%. This forecast is closely keeping in line with the Congressional Budget Office prediction of 2.9% and the Fed forecast of 2.6% to 3%.
The U.S. economy is rising partly because the policies presented and implemented are better than those of other countries. Analysts are still looking across the globe and are continuing to argue that, if the U.S. continues on its economic rise, the country will continue to outdo other global economies.
As the world continues to watch U.S. domination slowly escalating, global investors will soon begin to take Wall Street more seriously.
