US economy growing slower than expected
March 3, 2016, 7:01 pm

US stocks have had a turbulent start to 2016 due to a stronger dollar and weaker demand for commodities abroad [Xinhua]

On Thursday, a report from the Labor Department showed that productivity in Q4 fell by 2.2 per cent compared to the same period last year.

For all of 2015, productivity rates grew by just 0.7 per cent, which the Labor Department said is the fifth consecutive year of weak growth.

Meanwhile, the Commerce Department said that US factory orders in January grew by 1.6 per cent after dropping 2.9 per cent in December.

While the 1.6 per cent growth is the highest in seven months it is less than the 2 per cent level forecast by economists.

Analysts say that factory orders have been hurt by a strengthened dollar – which makes US wares all the more expensive for foreign importers, and low oil prices which have thwarted investments.

While orders for durable goods – chiefly in the aircraft industry – were up 4.7 per cent in January, demand for non-durable goods fell 1.4 per cent.

According to the Bureau of Economic Analysis US economic growth in Q4 was recently revised to 1 from 0.7 per cent, slowing from 2 per cent in Q3.

Overall, GDP growth for 2015 was at 2.4 per cent.

While growth in Q1 2016 is forecast between 2.5 and 2.6 per cent, the economy is still growing slower than hoped by the Federal Reserve.

US Federal Reserve chief Janet Yellen oin February echoed what many investors and analysts had feared – the global economic slowdown is weighing down on domestic US growth.

In prepared statements to Congress, Yellen outlined risk factors such as dropping commodity prices and the correction in China’s economy as reasons to continue to monitor internal and external conditions ahead of another interest rate hike.

She cited “declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar”.

Some analysts are predicting that the Fed is unlikely to announce a second rate hike at its monthly meeting later this month.

The BRICS Post with inputs from Agencies