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18 PalletCentral • May-June 2015 he U.S. Economy looked very strong headed into the last few months of 2014. Overall growth, as measured by Gross Domestic Product (GDP), was growing at a 5% pace in the second and third quarters of 2014. Industrial production was up a respectable 5% above year ago levels in November. Then we hit the first bump in the road. Real GDP growth slowed to 2% in the fourth quarter, primarily because of a drop in net exports and government spending. Hidden in the report, however, was still very good news. Consumer spending, which is the key driver of the economy, continued to improve. Consumer spending was growing at a 4% rate in the fourth quarter compared to only 2% in the first half of the year. Even with slower GDP growth, everything was set for continued improvement in 2015. Growth Slowed Even Fur ther… Temporarily But as can happen when everything looks too good, you get an upset condition. There were three other bumps in the road that will slow overall growth in the first quarter to about 1% or lower (the report is released on April 29). They are: 1. The severe winter weather in the eastern half of the country put a damper on both consumer spending and on housing starts. Housing starts slipped below 1 million units and are expected to rebound in March. 2. The West Coast port strike had a significant impact on the U.S. supply chain for consumer goods, affecting consumer spending, but also slowed exports as well. 3. The big drop in oil prices was very good news for the consumer. It was not good news for the oil industry however. The industry slashed investments immediately, which will pull down business investment in the first quarter. In October, there were 1600 oil drilling rigs in the U.S. (up from only 400 rigs in 2010). By ECONOMY T A Few Small Bumps in the Road By Lynn O. Michaelis

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