The Bureau of Economic Analysis released its second estimate of gross domestic product on Friday, May 29. The second estimate of GDP measured on a seasonally adjusted annual rate basis was revised down to -0.7% from 0.2% in the first estimate. The SAAR for the first quarter of 2015 is down in comparison to the fourth quarter which posted a 2.2% SAAR and follows a negative SAAR also reported in the first quarter of 2014 at -2.1%.
While winter weather and the west coast strike were factors in the lower growth rate, the strongest negative factor appeared to be the strengthened dollar. Exports reported a -7.6% SAAR of growth compared to 4.5% in the previous quarter and -9.2% in the first quarter of 2014. Exported goods had a SAAR of growth of -14.0% further signifying the stronger dollar’s affect.
The lower second estimate of GDP could further delay an increase in the Federal Reserve’s federal funds rate. Most economists do not believe a rate hike will occur at the Federal Reserve’s next meeting which is scheduled for June 16 and 17. In general most economists think a rate increase is likely to occur at the end of the year following the Federal Reserve's September or December meeting. While GDP has not specifically been a targeted factor by the Federal Reserve in its monetary policy decisions the significantly lower rate of GDP growth could delay the timing for a rate increase even more.
Market indexes in the U.S. reacted negatively to the lower GDP revision on Friday. The Dow Jones Industrial Average and S&P 500 were both down 0.63% for the day. In the Dow Jones Industrial Average, General Electric (GE, Financial) fell the most in one day trading on Friday down -1.3%. All sectors in the S&P 500 were lower for the day with the industrial sector falling the most at -0.99%.
