US econ­omy likely strug­gled last quar­ter; mild re­bound seen

The Pak Banker - - COMPANIES/BOSS -

Af­ter strug­gling in the fi­nal three months of 2015, the US econ­omy is thought to be re­bound­ing in the cur­rent quar­ter, though not as strongly as most an­a­lysts had once ex­pected.

On Fri­day, when the Com­merce Depart­ment is­sues its third and fi­nal es­ti­mate of growth for the Oc­to­ber-De­cem­ber quar­ter, it's ex­pected to say the econ­omy ex­panded at a 1 per­cent an­nual rate. That would be the same es­ti­mate it made a month ago and would amount to just half the 2 per­cent an­nual growth in the July-Septem­ber pe­riod. For the cur­rent Jan­uary-March quar­ter, many econ­o­mists fore­see growth as mea­sured by the gross do­mes­tic prod­uct - the to­tal U.S. out­put of goods and ser­vices - ac­cel­er­at­ing to a 2 per­cent rate. But some an­a­lysts have been down­grad­ing their es­ti­mates of late, re­flect­ing some weaker-thanex­pected eco­nomic data.

An­a­lysts at fore­cast­ing firm Macroe­co­nomic Ad­vis­ers, for ex­am­ple, on Thurs­day re­duced their forecast of firstquar­ter GDP growth to a 1.5 per­cent an­nual rate af­ter the re­lease of a weak re­port on new or­ders for long-last­ing man­u­fac­tured goods. Those or­ders dropped 2.8 per­cent in Fe­bru­ary. That de­cline was seen as a sign that the na­tion's man­u­fac­tur­ing sec­tor is still strug­gling with weak­ness overseas and a strong dol­lar, which has made Amer­i­can­made prod­ucts more ex­pen­sive in for­eign mar­kets. This year, con­tin­ued strong gains in hir­ing could boost house­hold in­comes and sup­port solid in­creases in con­sumer spend­ing, which ac­counts for about 70 per­cent of eco­nomic ac­tiv­ity.

This month, the Fed­eral Re­serve left its key pol­icy rate un­changed af­ter hav­ing raised it from a record low in De­cem­ber. Fed of­fi­cials also scaled back their ex­pec­ta­tions for the num­ber of rate hikes this year from four to two.

The of­fi­cials said they thought the global econ­omy and fi­nan­cial mar­kets still pose risks even though fi­nan­cial mar­kets have sta­bi­lized since the year be­gan. Stocks had nose­dived af­ter in­vestors wor­ried about how steep the slow­down would be in China, the world's sec­ond-largest econ­omy. An­a­lysts have forecast that for 2016 as a whole, the econ­omy will grow around 2 per­cent. That would be down from last year's 2.4 per­cent growth.

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