Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

U.S. GDP: Is the Economic Sky Falling?

Economics / US Economy Jun 27, 2014 - 06:11 PM GMT

By: Investment_U

Economics

Tom Sandford writes: The U.S. economy just came out on top of one of the biggest financial upsets in decades, but you might not know it from the latest report on America’s gross domestic product (GDP).

According to the U.S. Commerce Department, GDP nosedived by 2.9% during the first quarter of 2014. It also set the record for the worst first-quarter performance in five years. Naturally, the news has some investors shaking in their boots.


Truth be told, it’s not that bad. Sure, the rate of droppage was more than double the 1.7% predicted by economists.

But the economic sky isn’t falling. According to economic analysts, the massive GDP plunge was essentially a speed bump brought on by the perfect storm of unlikely occurrences. A blip in the grand scheme of investments.

Job growth has held steadily at about 200,000 per month. Inventory and shipments are up. Consumer spending is still up 1%.

Though analysts had some choice words for the rate change, the report was read and then dismissed. Investors followed suit, and stocks actually rose.

"Despite the awful start to the year, the U.S. economy is nowhere close to recession," said BMO Capital Markets senior economist Sal Guatieri, in an interview with the BBC.

So why all the economic huffing and puffing? Here’s what you need to know about the GDP drop, and why analysts have already moved on.

The Ho-Hum of All Fears

The GDP drop is unique for a number of reasons that are not expected to reoccur in the near future.

For one, experts blamed an unusually long period of cold weather that sent a chill through a number of economic channels. There’s no exact way to tell how many prospective buyers skipped out on retailers, restaurants and car lots in lieu of a warm couch.

But the report comes close. Consumer spending underwhelmed analysts by increasing by just 1%, rather than the 3.1% they expected. That stung since more than two-thirds of U.S. economic growth comes from consumer spending.

Not surprisingly, analysts have blamed the frost for keeping profits down in retail and causing a slowdown in restocking, as well as domestic and foreign shipments. Exports dropped by 8.9%, which likely lobbed off 1.53% of GDP growth. It did not, however, limit economists’ optimism.

"The larger contraction in GDP in the first quarter is not a sign that the U.S. is suffering from a fundamental slowdown,” Capital Economics senior U.S. economist Paul Dales told CNN. “It was still largely due to the extreme weather.”

It may sound farfetched, but there is scientific proof. According to a study by the National Center for Atmospheric Research (NCAR), even the slightest inconveniences from inclement weather can take a toll.

NCAR researchers concluded that bad weather could have driven the GDP down by as much as 3.4%. When translated to banknotes, that would equal more than $485 billion in economic losses.

At the same time, cuts to food stamp programs and the expiration of unemployment benefits also cut deep. When coupled with a weaker-than-expected increase in healthcare spending, economists saw the writing on the wall.

In addition, growing store inventories amounting to $45.9 billion kept profits shelved. While it sits, 1.7% in GDP growth sits with it.

Nowhere to Go But Up

If economists’ nonchalant attitudes are any clue, the economy is expected to rebound in the near future for a few reasons. It turns out optimism might carry some value, especially in the minds of investors who look to leading analysts for guidance.

“If the optimists turn out to be right, the world's largest economy should show a return to growth in the second quarter,” says BBC New York analyst Michelle Fleury. “The U.S stock market's positive reaction shows investors seem willing to buy into that idea.”

While optimism alone is not solid ground for an investment decision, the proof behind it can be. For one, the cold weather has subsided, shipments are steady and inventory is poised to fly off shelves.

And the job market is holding steady, with around 1.1 million jobs added in the last five months. That’s consistent with an economy expecting to expand by 1% to 3% per year.

“This sets us up for a very solid Q2 payback, but how much remains uncertain," Deutche Bank chief U.S. economist Joseph LaVorgna told CNN.

Investors should not hesitate to trade stocks based on these GDP numbers, but if you’re looking to invest in a trade with a steadier track record, look to the services sector. Buoyed by increased business activity in June, the sector expanded at its fastest rate in 4 1/2 years.

"Companies are reporting strong demand for goods and services, linked to growing confidence among households and business customers,” says Chris Williamson, a chief economist at Markit - the company that developed the index. “And setting the scene for further robust economic growth as we move into the second half of the year."

Investors should look to invest in solid service industry leaders like Spar Group Inc. (Nasdaq: SGRP), RLJ Entertainment Inc. (Nasdaq: RLJE) and Command Security Corp. (NYSE: MOC), which were up by 17%, 3.3% and 7.5% by market close on June 26.

Source: http://www.investmentu.com/article/detail/38358/americas-gdp-economic-crisis

http://www.investmentu.com

Copyright © 1999 - 2014 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules