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The USA: problems of the first quarter are moving along into the second?

According to preliminary data, the US GDP showed a negative trend in the first quarter, falling by 0.7%. The reasons for these sudden problems of world’s largest economy have been already described before. I will just remind you the main ones. It’s important to do so to understand which of these causes are now gone, and which still continue to hamper economic growth in the United States.

So, there are three main negative factors that prevented the US economy from expanding in the first quarter:

  • bad weather – abnormally cold winter;
  • problems in the energy sector – strikes at the ports, decreased investment in the oil industry;
  • strong dollar – higher exchange rate of the national currency decreased competitiveness of US manufacturers and triggered trade deficit growth.

It is obvious that with the end of the first quarter only the first factor has completely gone. The other two remained to some extent. Although oil prices have somewhat recovered in the second quarter compared to the first, there is no certainty that this moderate recovery will be enough to stop the decrease in investments into the energy sector. The dollar’s exchange rate of the dollar has changed only slightly in the period from April to June, so it is unlikely that the US trade deficit declined sharply.

So, it’s no wonder that the US reports, published in the second quarter, mention only mild and restrained acceleration of economic growth. Moreover, I was ready for such development, as I noticed a long time ago that the average growth of the US leading indicators in the first quarter was 0.2% – three times slower than in 2014.

Now the hopes for acceleration of the world’s largest economy have shifted to the second half of the year, although these expectations are also surrounded by uncertainty. Let’s remember the recent proposal of the IMF to postpone the rate hike due to increased risks of weak economic growth.

 

Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

According to preliminary data, the US GDP showed a negative trend in the first quarter, falling by 0.7%. The reasons for these sudden problems of world’s largest economy have been already described before. I will just remind you the main ones. It’s important to do so to understand which of these causes are now gone, and which still continue to hamper economic growth in the United States.

So, there are three main negative factors that prevented the US economy from expanding in the first quarter:

  • bad weather – abnormally cold winter;
  • problems in the energy sector – strikes at the ports, decreased investment in the oil industry;
  • strong dollar – higher exchange rate of the national currency decreased competitiveness of US manufacturers and triggered trade deficit growth.

It is obvious that with the end of the first quarter only the first factor has completely gone. The other two remained to some extent. Although oil prices have somewhat recovered in the second quarter compared to the first, there is no certainty that this moderate recovery will be enough to stop the decrease in investments into the energy sector. The dollar’s exchange rate of the dollar has changed only slightly in the period from April to June, so it is unlikely that the US trade deficit declined sharply.

So, it’s no wonder that the US reports, published in the second quarter, mention only mild and restrained acceleration of economic growth. Moreover, I was ready for such development, as I noticed a long time ago that the average growth of the US leading indicators in the first quarter was 0.2% – three times slower than in 2014.

Now the hopes for acceleration of the world’s largest economy have shifted to the second half of the year, although these expectations are also surrounded by uncertainty. Let’s remember the recent proposal of the IMF to postpone the rate hike due to increased risks of weak economic growth.

 

Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!



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