June 10, 2015
Moutray: GDP Growth Still Faces Headwinds
The U.S. economy faces several headwinds, but it will push through most of them, said Chad Moutray, chief economist for the National Association of Manufacturers, in his remarks at last month’s MSCI Annual Convention in Chicago.
The strong dollar and weak global economies were the primary drags on the U.S. economy in the first quarter, he said. The value of the dollar gives a significant cost advantage to foreign producers, hindering U.S. exports and promoting imports.
Two other forces also were at work. The West Coast port strike continued to hamper economic activity, even months after it was resolved. And, for the second straight year, difficult weather conditions slowed commerce, especially in the Northeast.
Still, after an almost-flat first quarter, the second quarter was showing improvement. Moutray held out hope for 3.0 percent GDP growth in the quarter, driven by the rebound effect coming off the sluggish Q1.
“The real question is the third quarter and how much of an impact the dollar has on overall GDP growth,” Moutray said. Whether GDP can hit the 3.0 percent market in the second half remains uncertain.
Working in the economy’s favor is an improving jobs picture. Moutray estimated unemployment will fall to near 5.0 percent by year’s end, though that is mitigated by lower labor participation rates.
Increased activity in construction, both residential and nonresidential, is also positive for the economy, he said.
The energy market has taken the hardest hit, as oil prices dipped below the $50 per barrel level, making it unprofitable for energy companies to drill. The low oil prices translated to lower gas prices at the pump, but did not generate the hoped-for bump in consumer spending, Moutray said. The average citizen is putting more of those extra dollars into savings, rather than purchasing durable goods and other items. That’s a problem, considering that consumer spending accounts for more than 70 percent of the U.S. economy.
“We haven’t seen a whole host of consumer spending. It doesn’t mean it won’t happen, but it hasn’t yet,” Moutray said.