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Near-Zero Growth in US

Near-Zero Growth in US
Near-Zero Growth in US

Here’s one trademark of the slow-motion US economic expansion: Near-zero growth in any given quarter is nothing to panic about. 

For the third time in a row, the economy looks to have had an awful first three months of the year. Gross domestic product is seen advancing at a 0.6% annualized growth rate, according to the Bloomberg survey median. 

Yet if 2014 and 2015 are any indication, GDP will rebound in the subsequent quarter as consumer demand picks up and keeps the expansion moving ahead. Rather than being a harbinger of a recession, a weak first quarter is emblematic of an economy that’s stuck in a sluggish expansion, with average growth of 2%. 

It doesn’t take much to knock the pace down below 1% before it bounces back. That’s why Federal Reserve policy makers, meeting Wednesday, aren’t abandoning plans to raise interest rates further.

“Get used to it,” said Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch in New York. “We’re just a lower-growth economy now. Within the random noise of the data, in any given year, it’ll be normal to get a near-zero quarter every year. It won’t necessarily be the sign of something bad happening.”

Sustained, strong hiring is a major reason why economists and some Fed policy makers view any weak first-quarter GDP numbers due out Thursday as an aberration. Payrolls grew by 209,000 per month during the period, well above the 157,000 average throughout the almost seven-year-long expansion.

“You can’t argue with the job market,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “It’s just not consistent with an economy that is in trouble.”

Financialtribune.com