Currency Analyst since 2010

M. Jensen: why slowdown in the US?

  By Mark Jensen

US GDP growth slowed from 5% in Q3 to 2.6% in the final 3 months of 2014.

There are many conclusions to draw from these data. On the one hand, household spending boosted by a surge in hiring and a slide in gasoline prices rose to almost a 9-year high.

On the other hand, US business was hit by a double blow. Firstly, American companies have become less competitive at the domestic market, because imported goods started to cost less as the USD strengthened. Secondly, the shape of the global economy has worsened, and the demand for the US exports fell. All this has worsened the US trade balance and affected the nation’s GDP.

Economists have different opinions about how high the US economic growth will be in 2015. Many think that in the first quarter the growth pace will be the same as in Q4, 2014, because companies decrease inventories. Then, in spring inventories will once again start increasing thus accelerating American GDP growth.

The Federal Reserve sounded rather confident in the US economy at the last meeting, but the officials made it clear that they want to wait and see how the situation develops. The labor market data due on Friday (NFP, average earnings, unemployment rate) will be especially important in this context. For now low growth in wages in the US is a worrying factor, because it limits consumer wealth which is currently the main engine of American growth.

So, keep an eye on America this week and in all of the weeks ahead. Negative surprises will make USD suffer.

Scroll to top