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The U.S. economy grew even more slowly than originally thought in the second quarter of 2012, according to new data from the Commerce Department. One culprit? That massive drought that has dried out the Midwest all year and dented crop production.
“Don’t panic,” cautioned a research note from Capital Economics. The weak patch, the firm argued, “will eventually be reversed when the drought abates.”
Eventually that may prove true. Yet the drought is expecting to keep pinching growth through the rest of the year.
The research firm Macroeconomic Advisers now expects the U.S. economy to grow at a mere 1.5 percent annual rate in the third quarter of 2012, down from its earlier forecast of 2 percent. The projected deceleration is due to a number of factors, but a drop in farm inventories is a big one.
“While the farm sector directly accounts for only about 1% of the U.S. economy,” the company said, “the hit to farm output is likely to be large enough to have a noticeable impact on U.S. GDP. A rise in the price of food late this year and into next year will lower real income and wealth enough to shave an additional one-tenth from GDP growth in the fourth quarter of this year and the first quarter of next year.”
http://www.washingtonpost.com/blogs...nock-0-4-points-off-growth-in-second-quarter/
“Don’t panic,” cautioned a research note from Capital Economics. The weak patch, the firm argued, “will eventually be reversed when the drought abates.”
Eventually that may prove true. Yet the drought is expecting to keep pinching growth through the rest of the year.
The research firm Macroeconomic Advisers now expects the U.S. economy to grow at a mere 1.5 percent annual rate in the third quarter of 2012, down from its earlier forecast of 2 percent. The projected deceleration is due to a number of factors, but a drop in farm inventories is a big one.
“While the farm sector directly accounts for only about 1% of the U.S. economy,” the company said, “the hit to farm output is likely to be large enough to have a noticeable impact on U.S. GDP. A rise in the price of food late this year and into next year will lower real income and wealth enough to shave an additional one-tenth from GDP growth in the fourth quarter of this year and the first quarter of next year.”
http://www.washingtonpost.com/blogs...nock-0-4-points-off-growth-in-second-quarter/