U.S. Economy is like a cob-web which is spread out to various other developed, developing and emerging economies. Its like, if the US Economy sneezes several economies catches cold.
It’s a time when the work-stopping blizzards of winter have passed in US, and export growth gains momentum but then the obstacles is showing its sign of affecting the quarter growth.
The American economic expansion slowed in the first quarter. Total output grew at an annual rate of 1.8 % from January through March against an expected 4 % growth. This slow down is the result of turmoil in Middle East which led to increase in oil prices (it has risen by 32 % over the last three months). This has resulted in delayed construction resulting in investment in non-residential structures to fall by 21.7%.
Of these various economic troubles, the most threatening obstacle is higher commodity prices, which has reduced the amount of money that households and businesses spend on purchases.
Moreover, decline in government spending has been an another obstacle to the economy. The state and local governments have cut back their spending, and to add to the worse the federal government has also cut spending. This has a repercussion on the slowed quarter growth. But economists anticipate that increase in military spending will neutralize decline in government spending.
The US Economy surprisingly added 216,000 jobs in March to curb the unemployment in the nation. The federal government temporarily increased hiring for the decennial census making the month-end hiring to be the highest during the spring month. The hiring has been evenly spread in different sectors.
In spite of obstacles, Goldman Sachs forecast that US Economy shall expand at a 4% annual rate in the second quarter.
This is a Guest Post by Mr. Mitesh Agarwal, MBA (Finance) from IBS – Hyderabad