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- The latest GDP growth rate was next to nothing. Without GDP, job growth and home sales will come to a halt. Luckily, the weak growth in the first quarter appears to be a one-off event. The upcoming GDP numbers will be improving.
- The first quarter GDP growth rate was 0.2 percent. After a couple of awesome growth rates of near 5 percent in the middle of last year, the economy is fizzling out. In the latest, a decent gain from consumer spending (2 percent growth) was offset by a sizable decline in construction of commercial buildings. Exports fell due to a strong dollar while imports rose.
- Going forward, construction of commercial buildings will pick up for the simple reason that commercial vacancy rates are falling and rents are rising. In addition, there will be a growth in residential construction because there is a housing shortage. The trade deficit worsened, partly from a weaker global economy and partly from the stronger dollar. This trade deficit situation may not get better in the near term. Spending by the federal government was steady, but spending by state and local governments declined mysteriously, even though tax revenue has been rising. Expect more outlays by state and local government going forward.
- The GDP growth forecast is for 2.7 percent in the second quarter, and then 3.0 percent for the remainder of the year (plus/minus few decimal points). For the year as a whole, GDP will likely have expanded by 2.3 percent. That will be enough to generate 2 million net new jobs for the economy.
- Some quarters are awesome and other quarters are not. There is no consistency. In fact GDP growth on an annual basis has been underperforming for nine straight years compared to U.S. norm (GDP growth of less than 3 percent for nine consecutive years). Had the economy growth at just 3 percent historical average then a typical American would have about additional $5,000 in income. Another aspect of faster GDP growth is that it shakes thing up with greater upward economic mobility. Slow economic growth leads to stagnation of the rich people staying on top while the poor people staying on bottom. China’s much faster economic growth is the reason why it is able to crank out new millionaires from people who had in the past been in poverty.
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