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Stronger Growth Than Expected in First Quarter - 6/1/15

A paper recently published by the Federal Reserve Bank of San Francisco suggests that the U.S. economy may not have been as weak during the initial months of twenty fifteen as available data indicate.  The Bureau of Economic Analysis’ initial estimate of gross domestic product expansion during the year’s first quarter was just zero point two percent. 

But by analyzing the manner in which the government accounts for seasonal variations in output, the authors of the Federal Reserve report found “a good chance that underlying economic growth so far this year was substantially stronger than reported."  The paper indicates that first quarter growth may have been closer to one point eight percent.  While that is still below the economy’s long-term growth rate, it is not nearly as bad as the official government data indicate. 

The paper’s results are not simply important because they have made some people feel better about the economy.  The findings may help support those Federal Reserve policymakers who want to increase short-term interest rates sooner rather than later.  John Williams, President of the San Francisco Federal Reserve Bank and co-author of the report, believes the economy may be strong enough for interest rates to begin rising this month.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.