Real GDP Growth
Real growth rates of GDP are indicated in the ‘release highlights’ which are spread over annual and monthly periods. These growth rates are further spread via a four years period that lasts from 2010 to 2013. Real GDP has had fluctuations during this time. This is due to various economic factors. The annual results indicate that the highest rates of growth of real GDP occurred in 2012 and 2010. These years recorded growth rates that were higher than 2%. Contrary to this, the results of 2011 and 2013 reveal growth rates that are below 2% with that of 2011 being the least at about 1.6%.
Quarterly GDP spreads are intricate with varying levels of fluctuation. According to the quarterly growth rates of real GDP, the 2011’s fourth quarter had the highest rate of growth of approximately 4.8%. The lowest growth rate of real GDP was also recorded the same year at about 1.2% during the first yearly quarter (Bureau of Economic Analysis 2014). Most quarterly growth rates of real GDP spread over four years were centered on an average range from 2% to 4%. The suggestion of this data is that growth in real GDP appeared to remain constant for longer periods. This suggested consistent economic and monetary policies of the economy that are stringent and assessed properly to address the current economic factors and worldwide financial stability.
Going by the recorded data over the period of four years, it is possible to deduce that the growth rate of real GDP this year will be lower falling between 1.8% and 1.2%. This deduction is based on several factors. The expectation is that the growth rate of 2014’s first quarter will be lower than that of the previous years because of a reduction in the federal spending, consumer spending, as well as business investment. Poor conditions of the weather which have faced different states of the US will also affect a reduction in the growth of real GDP. There has been a reduction in the economic activities in these regions due to these weather conditions. In addition, directing funds into this region implies that there will be a reduction in the funds that will be spent on economic generators that include service improvement and infrastructure development.
In addition, the forecast of 2014’s growth rate of real GDP seemed bleak. This can be attributed to several factors. For instance, the expectation is that the monetary policy of the Federal Reserve on the quantitative easing will continue before a review is considered. This implies that liquidity is likely to be reduced substantially. As such, there will be a reduction in business investment and consumer spending (Picerno, Economonitor). The implication of this is that there will be a reduction in economic growth rate in the first as well as the second quarters. Nevertheless, the situation may be salvaged during the third yearly quarter when it is expected that the economy will grow by over 2% due to the Federal Reserves’ monetary policies which will ease following a reduction in the recession effects since it will be coming to an end.
Cash reserves will also be tightened by quantitative easing and this will have a negative impact on dollar value and interest rates. When the dollar is weak, it implies that the imported goods’ value will be higher. This implies that the prices of imported goods will be high in the local market. In addition, a trade imbalance will be caused by an increase in the imported goods’ value (Johnson 129). Additionally, an increase in interest rates will significantly reduce business investment because financial capital will not be easy to acquire.
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Bureau of Economic Analysis, U.S. Department of Commerce. (2014). GDP Growth Slows In Fourth Quarter. Bureau of Economic Analysis. Web.
Johnson, R. Stafford. Debt Markets and Analysis. New York, NY: John Wiley & Sons, 2013. Print.
Picerno, James. Q4:2013 US GDP Nowcast: +3.1%. Economonitor. 27 January 2014. Web.