Category Archives: GDP Increase

GDP Contracts

Newly announced financial data has shown that the United States economy has contracted during the first quarter. Typically, a recession is three consecutive quarters of contraction and the United States economy is not expected to be in recessionary mode. Economists believe that the reduction in GDP is attributed to temporary factors which will not have a long-term bearing on the country. Instead, other factors are being cited for the contraction in the economy including a cold winter and record snowfall which led to reduced sales as well as a strong dollar that hurt exports. The US dollar has risen significantly when compared to the Euro and Japanese Yen.

Revised estimates show a year over year reduction of gross domestic product of 0.7% when compared to previous estimates showing a growth of 0.2%. Other factors that added some concerns were lower inventory amounts held by companies and a growing trade gap. The trade gap is likely caused by the increasing dollar while lower inventories may be signs that US companies are expecting a reduction in future sales.

GDP is expected to increase by 2% during the second quarter, which would head off recessionary talk, but the half-year performance of the US economy would be the lowest since 2011. The biggest drags on the US economy, according to Boraie Development and Manta, were reduced energy prices and the sharply higher dollar value, both of which began to abate during the second quarter providing hope to economists that this is just a blip in GDP.