What explains slow U.S. economic growth?

In the first quarter of 2015, U.S. gross domestic product (GDP) contracted for the second year in a row, falling 0.7% (annualized). One-time factors, such as winter storms, the West Coast ports strikes, and the collapse in oil investment, were likely the primary contributors to the softness.

Data for the second quarter has indicated growth improved, but is unlikely to accelerate to a pace consistent with 3% average growth for 2015. We expect growth in 2015 to average just 2.5%, down from our forecast at the start of the year of closer to 3%.

Second quarter data has been mixed, with little sign of significant acceleration in economic activity. Durable goods orders have been weak, slipping 0.5% in April; consumer confidence has slipped, as measured by the monthly University of Michigan Consumer Sentiment Survey; and regional Federal Reserve (Fed) Purchasing Manager Surveys softened for May.

We still believe economic growth will remain in positive territory in the second quarter. Jobs data continues to point to improvement, and this week’s May employment report could indicate further strong positive gains in employment. Housing sales and building permits have grown, perhaps an indicator that the economy could see some further improvement in the second quarter.

For more information, please go to: https://reserve.usbank.com/insights/market-economic-update.

Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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