More News On The Economic Outlook

Posted by Bruce W. Woolpert on Mar 18, 2015


U.S. economic growth slowed in the first three months of 2011 as higher prices, especially for gasoline and food, caused American consumers to slow their spending on other goods. Gross domestic product rose at a seasonally adjusted annual rate of 1.8% in the first quarter, a significant slowdown from the 3.1% increase in the fourth quarter of 2010. Consumer spending, accounting for about 70% of demand in the U.S. economy, rose at a 2.7% rate in the first quarter. Higher energy and food prices pushed an inflation measure that's closely watched by the Federal Reserve up to 3.8%, matching the rate in third quarter 2008.

The Federal Reserve remains confident that the U. S. Economy is improving but concerned that the rate of economic growth is too slow to bring down unemployment. In its April Meeting, the Federal Reserve’s assessment was essentially that growing the economy and reducing unemployment remains its central goal. They do this by keeping interest rates low, by buying U. S. Treasuries and maintaining the money supply at a historically high level. They believe that the current increase in petrochemical prices is temporary and will not exist long enough to push inflation through all sectors of the economy. In other words, the cost of oil will not show up in manufactured goods and transportation services. They do state that they can‟t be sure about this and will continue to evaluate inflation concerns carefully. Economic recoveries often have several slow quarters that may not signal a double-dip recession. Growth is still positive in manufacturing, automobiles, and other durable goods, and businesses are investing in new equipment, but weakness remains in construction. If construction were to turn around, the overall economy would improve faster and have a stronger footing.

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