Introduction

            Economic activity finally began to exhibit additional signs of significant slowing in the second quarter after mixed signals from various economic data indicators and strong economic growth during the first quarter.  Real gross domestic product (GDP) increased at an annual rate of 2.5% in the second quarter following an increase of 5.6% at an annual rate during the first quarter of 2006.  These figures compare to an increase of 1.8% in the fourth quarter of 2005 and an increase of 3.2% for the full year 2005 on a revised basis.  The slowdown in real GDP comes at a time of continued high energy prices and further tensions stemming from geopolitical risks.  These factors likely weighed on consumers who reigned in spending during the second quarter.  In addition, economic activity was restrained due to decreases in federal spending and real residential fixed investment as well as significant slowdowns in real nonresidential fixed investment and exports of goods and services.  Continue reading →

Introduction

          Despite the devastating effects of Hurricanes Katrina and Rita in the Gulf states and initial signs of slowing during the first half of 2005, economic activity remained surprisingly firm in the third quarter with real gross domestic product (GDP) increasing by 3.8% during the quarter.  This favourable growth follows a 3.3% increase in GDP during the second quarter and a 3.8% increase during the first quarter of 2005.  Though economic activity increased at a lower rate in the second quarter, the third quarter appears to provide further evidence of the resilience of the U.S. economy even in light of adverse exogenous shocks stemming from natural disasters and the resulting spike in energy prices.  The 3.8% increase during the third quarter of 2005 is slightly lower than the 4.0% increase during the same period of 2004.  With the economy continuing to show signs of modest growth, albeit slower on a year-over-year basis, a number of factors may, in combination, be at work to further temper economic growth in the coming quarters.  To be sure, the economy for the remainder of 2005 is likely to experience continued growth, though at a more modest pace than in 2004, due to a number of adverse conditions that may restrain demand.  For 2006, economic activity may be negatively impacted by various developments during the second half of 2005 stemming from lingering effects from the hurricanes in the third quarter, higher energy costs, and rising interest rates. Continue reading →

Introduction

Signs of slowing economic growth began to emerge during the first quarter of 2005, with real gross domestic product (GDP) increasing by 3.1% during the quarter.  This tepid growth follows a 3.8% increase in GDP during the fourth quarter of 2004 and a 4.0% increase during the third quarter.  The pace of economic expansion has apparently slowed over the last three quarters with GDP increasing at a decreasing rate since the first quarter of 2004.  The 3.1% increase during the first quarter of 2005 follows a 4.5% increase during the same period a year ago and represents the slowest growth for the United States economy in two years.  Signs of economic softness were evident throughout the broader economy with personal consumption expenditures increasing at a much more tempered rate, retails sales weakening, continued elevated energy prices, and an increase in inflationary pressures.  The Federal Reserve’s gradual removal of accommodative monetary policy may have also contributed to the deceleration in real GDP in the first quarter of the year.  With the economy showing muted signs of abating growth, a number of factors may, in combination, be at work to impede further robust growth in the short-term.  To be sure, the economy in 2005 is likely to experience continued growth, albeit at a much more modest pace, due to a number of adverse conditions that may restrain demand. Continue reading →