News Column

U.S. Economy: When a Slip Becomes a Fall

July 1, 2014

Isaac Cohen -- HispanicBusiness.com

The U.S. economy's first-quarter contraction is in line with the slow recovery (file image)
The U.S. economy's first-quarter contraction is in line with the slow recovery (file image)

Recently revised figures by the Commerce Department on U.S. economic growth, during this year's first quarter, revealed a steep contraction of almost 3 percent, instead of the initial estimate of a smaller decrease of 1 percent.

With the revision, what was initially perceived as a slip became a steep fall.

At first, the severe winter weather in January and February was seen as the main culprit. However, the revision brought out other relatively more influential factors, such as inventory reduction and lesser exports.

Together, these factors contributed 1.8 percent to the downward revision of first quarter growth.

Except during recessions, such a fall in the growth of a single quarter had not been registered since 1947, when the government started gathering economic growth figures.

The revision surprised almost all observers, who consequently revised downward their growth projections for 2014.

For instance, the central bank reduced its projected 2014 growth figure, from almost 3 percent to 2.2 percent.

Even if the economy grows during the rest of this year at the more vigorous yearly pace of 4 percent, given the first quarter steep fall, the yearly average growth will be closer to 2 percent.

This modest performance is consistent with the long and slow recovery of the last five years.

-----

Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Español TV and radio, and a former director, UNECLAC Washington Office.


For more stories covering business, please see HispanicBusiness' Business Channel



Source: HispanicBusiness.com (c) 2014. All rights reserved.


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters