Essentially standing still, the U.S. economy (Gross Domestic Product, a measure of overall output) only grew 0.7% between October and December. New government data released on Friday indicates that perhaps the global whirlwinds and slowdowns are beginning to impact America.
It’s hard to consolidate all expert’s opinions on the matter, but the general consensus is the lack of growth seems to be raising concerns about the U.S.’s ability to fight through major global downturns without significant bumps and bruises.
With the data published by the Commerce Department comes some good and bad…
Corporations are being hit on multiple fronts. Not only are global consumers spending less, but also the strength of the dollar is impacting U.S. corporations as they solicit their goods abroad. This strength is good in the fact that it represents investors viewing the U.S. economy as healthy and attractive compared to other advanced economies. However, it’s bad in the fact that as the dollar continues to appreciate compared to the Euro, Japanese Yen, and other world currencies, U.S. manufacturers end up on the short end of the stick only earning 85 cents compared to every dollar they were earning abroad this time last year. And foreign pressures aren’t easing in this regard any time soon, as shown by the fact that Japan pushed their interest rates negative on Friday in an effort to weaken their currency and stimulate growth.
Nevertheless, there is a silver lining to all of the recently released data. U.S. Consumers are spending more money eating out, buying household appliances, and purchasing new cars. (Fourth quarter personal spending grew 2.2%) This increased spend is fueled by a robust labor market that continues to add over 200,000 jobs per month and cheap oil contributing to discounted prices at the gas pump.
So while most agree there are interesting times ahead, and the probability of a recession is higher than we’d like, as long as consumer spending stays on track, and the Federal Reserve prudently manages rates, (We’ll see what they do in March), the hope is America can navigate the turbulent road ahead.