by Pam Martens and Russ Martens, Wall Street on Parade:
Yesterday, economists at the Atlanta Fed’s Center for Quantitative Economic Research notched down their forecast for real GDP growth – the seasonally adjusted annual rate – to a tepid 0.2 percent for the first quarter of 2015. The revision from the earlier forecast of 0.3 percent followed yesterday’s durable goods report that showed a dramatic decline of 1.4 percent in February on a seasonally adjusted basis. Durable goods are products like refrigerators, washing machines or computers, items expected to last for at least three years. Because durable goods carry higher price tags than most other consumer outlays, a weakening in durable goods can be a warning of a tapped out or retrenching consumer.
This first quarter forecast stands at odds with the Federal Reserve Board’s FOMC statement of March 18, 2015 which singled out “strong job gains” and rising household spending.
One notable area of Federal Reserve myopia appears to be the credit tightening impact of a rising U.S. Dollar. As of mid March, the greenback has risen by more than 22 percent on a trade-weighted basis. This creates serious headwinds in a number of areas. First, U.S. goods priced in dollars become more expensive and thereby less competitive in foreign markets. That hurts the earnings of the big U.S. based multi nationals and leads to job cuts. It can also hurt smaller businesses that rely on exports for a significant part of their earnings.
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