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.
