A chill wind has blown on the US economy this winter. Extreme weather conditions, known as the Polar Vortex left much of North America with record periods of cold and winter weather this winter season as cold, artic air plunged downwards over much of the continent. The extreme weather is being blamed for what could be termed a “minor cardiac arrest” in the US economy. Q1 growth figures for 2014 have come in at an annualised rate of 0.1% (defibrillators on standby please…) which contrasts strongly with the comparable figure for Q4 2013 which put growth in the American economy at a healthy 2.6% increase in the nation’s Gross domestic Product.
Understandably, given the harsh winter conditions, home building was down by 5.7% compared to Q1 2013. Business investment dipped by 2.1% and purchases of new equipment also fell by 5.5% compared to the position in 2013. The US Department of Commerce has laid the blame for the downturn on the weather and falling US exports to the rest of the world, but it went on to note that economic activity seems to be bouncing back; consequently the Q1 data represents a nasty bout of angina rather than a full-on heart attack, perhaps. Weaker exports contributed to the US trade deficit and accounted for a 0.8% dip in growth according to the Department of Commerce. A further 0.6% of growth was lost as businesses cut back on restocking inventory over the quarter (possibly partially linked to the weather).
Analysts expect that the US economy will get back on track in Q2 with annualised growth projections of 3% being widely touted. They are Bullish that improved employment prospects will encourage a growth in consumer spending and spur business investment as the year goes on. The type of growth that they envisage would finally be consistent with the recovery phase of a normal economic recession-recovery cycle.