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A Journal opinion article - Essay Example

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Summary
Reasons for decline in the estimated GDP of United States in the first quarter The decreasing gross domestic product of the United States economy is one of the contemporary issues among Wall Street Journal readers. Reports indicate that the gross domestic product of the fell short of the projections by almost two percent…
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A Journal opinion article

Download file to see previous pages... The first three months of the year experienced decline in spending by domestic household in the United States as reported by the commerce department. The decline in consumption dropped from the estimated 3.6 percent to 2.6percent as the CNBC reported. The commerce department reported massive decline spending in crucial sectors, notably the service sector based on the report by CNBC, consumers decreased their spending in legal services, health care and more so in personal care. One of the major causes of the consumption decline could have been the new taxation law. The increase in the social security tax at the beginning of the year could have limited the extent to which households spend within the first quarter. The tax increase lowered directly the amount of income that households would take home at end of the day. After taxation, consumers were left with only meager income; these consumers choose to concentrate on basic commodities only (Morrissey 1). As opposed to earlier projections that had showed increase in the amount export for first quarter, the latest report indicated otherwise. The department of commence statistics indicated that export decreased indeed to 1.1percent while imports also declined to 0.4 percent. The decrease in export translated to limited foreign currency at the disposal of the government for the country to trade with other countries. Consequently, the fall in imports resulted to decrease in foreign revenue. Both reductions in export and import negative effects on the country’s gross domestic product and contributed to the drop in the figure that had been projected for the first quarter to be 2.4percent (Morrissey 1). Amid concerns that the government was cutting its spending, consumers could have become more reserved in their spending. Government spending cut could lead to increase in the prices of commodities that had been earlier subsidized. A decrease in government’s spending could also result to households paying for basic services that were being catered for by the state prior to cut in spending. Vis a Vis the speculation of the government cutting its spending motivated a decline in consumption by consumers that further led to drop in the GDP of the first quarter. However, according to the wall street journal, the cut in governments spending which took effect in first month of the first quarter led to direct deduction of 0.9 percent off the growth rate (BBC 1). Due to economical globalization of the world, there existed unprecedented events all over the world that were bound to destabilize the projected GDP by department of commerce. Economic instability in states such as china and European countries could have contributed to gravitation of the united states GDP to 1.8 percent. With globalization, no single economy can exist in solitary in the 21st century. Hence, through globalization, the myriad of macroeconomics factors derailing the Chinese economy and euro zone states such as Greece adversely influenced the bilateral trade between these countries. The decrease in the annual economic growth of china triggered the decline in trade between the two countries. On the other hand, the worsening conditions of euro zone states such as Greece continued to shift trade further away from the European countries causing down surge in the amount of investments by Americans in the oversees (BBC 1). Though the department of com ...Download file to see next pagesRead More
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