The US economy is currently stagnating, according to business survey figures released Monday.
The sales managers’ index compiled by World Economics dropped to a score of 50.8 in February from 51.1 last month. Scores above 50 imply the economy grew compared with the month before, with February’s score pointing to very sluggish growth, NewsNow reported.
Business confidence was at a three-and-a-half year low as both the manufacturing and services sectors lost momentum.
“The February SMI paints a gloomy picture for the US economy and indicates a continuation of the slowdown in the rate of economic growth which began in the second half of 2015,” said World Economics chief executive Ed Jones.
He added that the survey “suggests that economic conditions are likely to be challenging for the remainder of Q1 [January to March] 2016.”
The SMI sales index, which measures demand conditions facing individual firms and has a close correlation with GDP growth, stayed in contraction territory for the third month in a row. World Economics said it indicated negative growth as the first quarter of the year progresses.
The US economy grew at an annualized rate of 0.7% in the final three months of the 2015, a sharp slowdown from 2% in the previous three months.
The US Federal Reserve raised interest rates in December for the first time since the 2008-09 recession. Some economists have argued that the recent negative data and stock market declines mean the central bank may have to backtrack.
However, Federal Reserve chair Janet Yellen said financial conditions had become “less supportive” of growth, but pointed out that the labor market was still in fine fettle.
Stagnating
Two recent reports show that the US economy is not growing at a healthy rate, despite a low unemployment rate and increases in wages. Coming amid uncertainty in global markets, these reports have fueled speculation about long-term stagnation, or even another recession.
America’s GDP grew only 0.7% during the last quarter of 2015, according to a preliminary report released by the Bureau of Economic Analysis on Jan. 29. Over the entire year, GDP grew by just 2.4%.
The Bureau of Labor Statistics’ January report showed more positive signs, with 151,000 jobs added in January and an unemployment rate of 4.9%, considered very healthy by most economists.
Overall, 2015 was not a good year for America’s GDP. The 2.4% growth rate is lower than the long-run historical average. More than that, there was really only one good quarter in the year–the second quarter, when GDP increased by 3.9%. The year ended on a pretty low note, with only 0.7% growth.
The term “secular stagnation” has become a popular buzzword in economics recently. It refers to the worry that the US economy is not going to grow as much as it has in the past.
