Why the American economy has become worse in the first quarter by 3%

Thursday, 18 December 2014 14:07

The weather, statistics, instability of growth and other factors which affected the maximum quarter collapse of GDP of the USA over the last 5 years. How will negative news turn back for Russia?

GDP of the USA in the I quarter of 2014, by a final assessment, was reduced by 2,9% of quite similar period of 2013. Data of bureau of the economic analysis of the Ministry of Trade of the USA testify about it. The analysts interrogated by Bloomberg agency expected on average reduction of GDP in the I quarter for 1,8% by a final assessment against reduction of GDP for 1% by the reconsidered assessment.

In the press release of Ministry of Trade of the USA it is specified that falling of GDP is connected with decrease in export by 0,6%, personal consumer expenses on 2,3%, recession of investments into new productions for 4,5%, decrease in the municipal and public expenditures. Also in the I quarter of 2014 profits of corporations, in comparison with growth by $6,1 billion in the IV quarter of 2013, fell to $52,6 billion.

The chief economist of Deutche Bank on the USA Joe Lavona calls unusual sharp reduction of GDP of the USA without recession. "There are only two quarters in the past when we saw the same decrease when the economy wasn't in a condition of recession — the IV quarter of 1949 (-3,5%) and the II quarter of 1981 (-2,9%), the analyst notices. By Deutsche Bank estimates, falling of GDP is connected including with decrease in expenses on health care. Thus the bank waits for GDP growth of the USA in the second quarter for 4,2%.

Such reduction of economy is partly explained by features of the American statistics, the analyst of Raiffeisenbank Denis Poryvay says. According to him, the bureau of the economic analysis of Ministry of Trade of the USA at first considers GDP on narrow selection, and then, with the advent of new information, specifies a final assessment. "Now information on growth of consumer expenses was revised towards decrease, and all GDP fell down" — he explains.

Consumption was reduced because of bad weather in the USA. The chief economist of VTB of the Capital on Russia Vladimir Kolychev says that in April there were first preliminary data on GDP for the I quarter — and results were low. According to him, in the I quarter in the USA there were abnormal frosts that had to affect economy. For Kolychev it became unexpected that the indicator of GDP fell so low.

The director of the Center of Macroeconomic Researches (CMR) of Sberbank Yulia Tseplyaeva also explains falling of GDP with bad weather conditions in the USA. She urges not to worry about it — an assessment of GDP of the USA in the I quarter specified and the third.

Poryvai says that the differences in growth rates of GDP testify that the economy of the USA is still not really steady. But, according to him, it doesn't mean that there were fundamental problems. It will be possible to draw conclusions after a release of data for the II quarter. Reaction of the market to bad statistics will be short-term, he considers. The main factor for speculative investors - actions of the Federal Reserve System, and it continues to print money so far. According to Kolychev, investors can doubly treat this event. Some of them can increase investments into risky assets, for example, currencies and indexes of developing countries, expecting that low indicators of GDP growth will force FRS not to force increase of rates. On the other hand, the statistics shows that GDP indicator for the II quarter will be much better. It is necessary to add to it that inflation in the USA is accelerated. These two factors can push FRS to increase of rates, so, the part of investors will invest less in emerging markets.

"It is already visible that with approach of spring improvement will begin in economy of the USA " — Tseplyaeva notes. According to her, restoration after crisis didn't suffer. Thus Tseplyaeva is sure that FRS deliberately approaches reduction of quantitative mitigation. Members of FRS say that they will increase rates not earlier than in 2015.

A lot of things will depend on statistics for the II quarter and profits of the companies, the director of the analysis of the financial markets and macroeconomic of "Alpha capital" Vladimir Bragin considers. "So far forecasts are positive — GDP growth for 3-3,5%. However, if indicators on profits of the companies decrease as it was in the I quarter, investors can apprehend it as a business cycle turn that can lead to powerful correction in the American market, and, therefore, it will touch also emerging markets" — Bragin concludes.

The Russian indexes decreased today, except certain issuers. The index of MICEX by the end of the auction at the Moscow exchange decreased by 2,43% to 1481,95 points, and the RTS index fell to 2,68% to 1383,02 points. According to the managing director of Arbat Capital Yulia Bushuyeva, the Russian market fell not on news about the American GDP, but on the next discussion of sanctions. "People wait for Friday and, whether America will go for broke or not. Whatever Putin and Poroshenko said, war proceeds, and it can't be stopped in one day " — Yulia Bushuyeva speaks."  

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