Let’s start with a context: in Q4 2014, the world’s largest economy grew at an annualised pace of 2.2%. Data for the initial estimate of US economic growth in Q1 2015 indicates that the brakes have firmly been applied to the US economy. According to the US Commerce Department, US Q1 growth came in at 0.2% - again it is worth noting that this is a preliminary estimate based on partial data and it will be revised once more comprehensive figures are available.
Pretty clearly, such a big hiccough in US economic output will move any decision by the Federal Reserve to increase the interest rate further into the future since any such rise could further slow the economy.
The growth figure is the worst since Q1 2014 which was blamed on an exceptionally hard winter which analysts believed kept consumers out of the stores. The consensus view for Q1 2015 was that growth would come in at 1%, below the official projection of 1.27% - in reality, growth was much more anaemic than anybody thought. The reasons proffered for the slowdown again include an element due to another relatively hard winter, a dock workers’ strike, the fall in oil prices (hurting the profits of energy providers and stymieing oil-related investments e.g. shale oil projects) and the strong Dollar.
The stronger Dollar is being blamed for a 7.2% slump in exports over the course of Q1. A stronger Dollar makes US goods dearer in importing markets – 12 months ago, a Euro bought $1.385; now, the Euro has rallied over the past couple of weeks and buys $1.10.
In common with the UK economy, analysts are expecting economic performance to pick up in Q2 and across the rest of the year.