The Bureau of Economic Analysis (BEA) today released their third (and final) estimate for the rate of U.S. economic growth during the first quarter of this year. Whilst the economy still contracted, the BEA has revised (again) the rate of this contraction, putting growth at -0.2%. Alarmingly, their report highlights the damaging impact of current trade deficits upon the economic recovery; 1.9 percentage points were cut from the growth rate, the worst for 30 years. Due to the U.S. dollar’s current “over-valuation,” in the words of the International Monetary Fund (IMF), exports have been severely hit as U.S. goods become more expensive abroad. In the past year, the dollar has risen 15%, thus making imports much cheaper. Added to a 7.1% increase in imports in the first quarter, the trade gap widened significantly as exports dropped by 5.9%.
Furthermore, the BEA report highlights a contraction of fully 2 % in U.S. business investment, which is the worst reading since 2009. Therefore, investments made in construction, research and development, and machinery, along with other BEA data, shows how the manufacturing sector has also suffered during 2015.
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