GDP – Not Going To Get Much Better

For all of the pomp and circumstance, all of the jobs gains, all of the discussion about how new rules and regulations are helping the U.S. economy, the final 1Q GDP came in at a very unimpressive 1.4%. While this was a bit higher than the expected 1.2%, it is in now way near what we should be seeing with rates near the lowest in history and employment at decade lows.

There are many reasons why there is such little growth at this time, but it appears that the main culprit is the fact that the U.S. is a mature economy and no longer the export driven powerhouse that we have been. With many other countries producing the world’s manufacturing needs, there is major competition that has left us with only a few ways to grow.

Over the past decade, emerging markets have taken the lion’s share of manufacturing as we have exported the work in an effort to keep costs down. Those economies (China, Vietnam and much or emerging Asia), have seen a healthy level of GDP that may have simply been a shift (or gift) from developed countries.

If there is some change and the U.S. brings back manufacturing we could see a big increase in GDP going forward. However, that will probably cause a major increase in prices/inflation as higher wages would cause finished goods prices to increase. That is not something that will be tolerated well and may equalize the impact of better GDP numbers.