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Bloomberg hypothesizes that first quarter growth slowed due to high fuel prices, which decreased consumer spending.
Gross domestic product rose at a 1.9 percent annual pace after increasing at a 3.1 percent rate in the previous three months, according to the median estimate of 66 economists surveyed by Bloomberg News before an April 28 Commerce Department report.
I was surprised that household purchses account for about 70% of all purchases. How will higher food and energy prices impact economic growth? Housing? Thoughts?
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I find it hard to believe that higher oil prices resulted in a 1.2% decrease in GDP from the previous months. I would think there most have been other factors influencing this lower reading, perhaps it was a combination of higher oil and food prices. Either way it is astonishing how much of an impact these inflated prices have on GDP.
ReplyDeleteSomeone posted an article a while back stating that food prices should decrease in the short term but oil would most likely stay high.
Yeah, along with Chris, I am seeing some confusion between correlation and causation. Sure, I bet oil prices have had an impact on GDP, but there is no way it is all 1.2%...
ReplyDeleteI agree with both Dane and Chris, the gas price increase has only been recently bad, it couldn't have affected the GDP that much in only a few months, but then again I'm not an economist. Overall, the increase in consumer goods is going to hurt consumers the most. I know that making 30,000 a year is no longer a sustainable living for most people. Salaries are going to have to go up, effecting production costs and creating a domino effect in the consumer goods industries. Hopefully the stimulus package will help... it should considering its basically free spending money, but what will that do to our debt?
ReplyDeleteI don't find it hard to believe at all that the cost of oil affected GDP. The GDP still increased by 1.9% over the first quarter. The article stated that the cost of a gallon of gasoline increased 24% since January...that is a lot in a very short amount of time (relatively). Because everyone uses gas everyday, and just about all of the things in our economy are reliant on oil....I don't find this Bloomberg hypothesis hard to believe at all.
ReplyDeleteI can see the merits for the argument Jared's comments. The average prices for a gallon of gasoline has reached the highest since September of 2008. In March, gas averaged $3.53 a gallon, compared with $2.78 a year earlier.I can see how higher fuel and food costs may limit consumer purchases of other goods and services. That means we need to see signs of further gains in employment that are necessary to bolster incomes. It seems like the oil issues are in trouble due to natural disasters in Japan and the tension in Africa. I hope the gas prices go down for an increase in consumer confidence (including my own).
ReplyDeleteI believe that the depreciating USD has a lot of influence on this decrease in GDP as well as the rising oil prices. Until the USD is more stable and appreciates against other major currencies, I believe the US economy will continue to decline. I don't see the prices at the pump dropping below $4 a gallon anytime soon but hopefully I'm wrong because like Ankur pointed out, it'll increase consumer confidence.
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