Lombardi Financial, a division of Lombardi Publishing Corporation (www.LombardiPublishing.com), a 28-year-old consumer publisher that has served over one million customers in 141 countries, warns weak U.S. economy, not winter weather, is responsible for abysmal 0.1% first-quarter gross domestic product (GDP) growth.
After reporting solid fourth-quarter 2013 GDP growth of 2.6%, the U.S. economy grew at a glacial 0.1% in the first quarter of 2014, the weakest pace since the end of 2012. According to the U.S. Department of Commerce, the slow pace of growth was a result of an unusually cold and disruptive winter coupled with tumbling exports. (Source: “National Income and Product Accounts Gross Domestic Product: First Quarter 2014 (advance estimate),” U.S. Department of Commerce, Bureau of Economic Analysis web site, April 30, 2014; http://bea.gov/newsreleases/national/GDP/GDPnewsrelease.htm.)
“Some described first-quarter GDP growth as being slow or sluggish, but that’s being exceedingly generous,” says economist and lead contributor Michael Lombardi of Lombardi Financial. “The fact is that first-quarter GDP results bombed, growing a measly 0.1% from a projected 1.1% quarter-over-quarter growth and down from 2.5% at the beginning of February.”
Lombardi observes that one of the so-called bright spots in the first-quarter GDP data was the three-percent growth in consumer spending. Unfortunately, that increase was bolstered by a 4.4% rise in spending on services like utility bills. For an economy that gets roughly 70% of its growth from wide-based consumer spending, these results are not spectacular, says Lombardi.
“Not surprisingly, the first-quarter standstill was blamed on the snow and is expected to be temporary. In fact, overly optimistic economists expect the U.S. economy to rebound three percent for the remainder of the year,” he adds. “If the economy was to grow at that rate, it would be the fastest pace since 2005, just before the U.S. fell into its biggest recession since the Great Depression.”
But that could be difficult, as Lombardi reminds investors that wages are stagnant, unemployment claims have been up, U.S. housing data has been disappointing, and debt levels remain high—not the best foundation for sustained economic growth.
“The U.S. can’t really look to the global economy for help, either, as the U.S. trade deficit widened in the first quarter as exports fell sharply,” Lombardi notes. “The eurozone is still in trouble and China and Japan continue to underperform; this isn’t good news for an economy that relies more and more on exports. In fact, between 2009 and 2013, U.S. exports increased by about 50%, with roughly half of all S&P 500 companies getting revenue from outside of the U.S.”
While the weak economic data have been blamed on the winter weather, Lombardi Financial believes they are just a reflection of the weak overarching national and global economy. For the U.S. economy to realize sustainable growth, it needs to create jobs and for wages to improve, he says.
“Over the last few quarters, Lombardi Financial has been warning investors that the U.S. doesn’t have the economic metrics in place for sustained growth,” Lombardi concludes. “Until it does, it appears as though economists will step over the obvious data and blame the weather.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Lombardi Financial, visit www.LombardiPublishing.com.
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