World Economy
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US Q1 Growth Weak

US Q1 Growth Weak
US Q1 Growth Weak

The US Commerce Department has revised up first-quarter GDP growth for the world’s largest economy. But despite the improvement on the first estimate last month, output slowed in the January-March period.

The US economy grew at an annual rate of 0.8% in the first quarter, better than the 0.5% stated by the Commerce Department in its first estimate a month ago, DW reported.

Despite the upward revision, the figure marked the second weak quarter in a row, following a modest 1.4% gain in the final three months of last year.

As the new year progressed, the economy was held back by turbulence in financial markets and was consequently hurt by a strong dollar and sluggish global demand, which eroded exports.

In addition, low oil prices weighed on the economy, undercutting profits of oilfield companies like Schlumberger and Halliburton, forcing them to slash spending on equipment.

There was no change in consumer spending, accounting for more than two-thirds of US economic activity. Consumption increased by 1.9%, the report said. What the upward revision did reflect, though, was a smaller drag from trade than previously reported as well as a rebound in after-tax corporate earnings.

After two sluggish quarters, there are signs the economy has been gaining momentum again with retail sales, exports, industrial production, home building and home sales all surging in April.

 Rate Hike

Federal Reserve Chair Janet Yellen has said an interest rate hike would ‘probably’ happen “in the coming months.” But it would depend on whether the United States economy continued to grow at a fast enough clip.

Yellen expressed confidence that the US economy would keep growing and new jobs would continue to be created, suggesting that such an environment would be conducive to an increase in interest rates.

Growth in the current quarter is looking much more robust. Some estimates even put it between 2.5 and 3%.

“The economy is continuing to improve,” Yellen told an audience at Harvard University on Friday. “Growth looks to be picking up.”

As a result, the head of the Federal Reserve said a decision to raise interest rates would be appropriate “probably in the coming months.”

Her suggestion echoed a timeframe that has been mentioned by other Fed policymakers in recent weeks as well. Going by their prognoses, such a decision could come as early as June or July.

Financialtribune.com