The
economy looks weak in the first quarter, but better days are coming
This article talks about
how the GDP growth will likely be slow in the first quarter, but should
accelerate stronger later in the year. The Bank of America indicated that its
growth rate would decrease from 2.3% in Q1 but would eventually rise up to
2.9%. The Federal Reserve indicated that the US growth rate would increase from
2.5% to 2.7%. There will be a stronger payback in the second quarter, as
mentioned in the article with growth projected to increase from 3.3% to 3.7%,
and a 3.3% to 3.6% growth in the third quarter. An investment strategist in Charles Schwab
mentioned that “the economy looks strong and we believe the upcoming earnings
season will be solid”. The optimism of a stronger economy arose from good
estimates from the manufacturing industry. The only reason to negate that
optimism are disappointing auto sales to retail to housing. Durable goods also
increased by 3.1%, ahead of the 1.7%. Overall, with low cost of borrowing, high
capacity utilization and tax cuts, US economist at Capital Economics Andrew
Hunter believes that business investment will continue to expand at a healthy
pace in the coming quarters. The Federal Reserve of Atlanta mentioned that the
gains in durable goods were offset by a decrease in new home sales. According
to the consensus, the market growth rate for the fourth quarter is at 2.5%.
A high expected growth rate
is vital to increase the consumer confidence, so that spending is high (MPC
increases), businesses are performing well, which further increases the
economic growth rate in the long run.
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