Tech Price Declines’ Impact on Productivity
Price declines that were apparent in the tech sector in the late ’80s through ’90s would have added 0.3% to 0.4% back to productivity growth. The questions today remain: How do you value free applications? How does that value find its way into national income accounts? Siegel adds that the productivity slowdown in the ’70s was partly due to a spike in oil prices, but today’s low oil prices only deepen this productivity puzzle.
Looking Ahead: U.S. GDP Growth and Euro at Parity with U.S. Dollar
According to Hatzius, Goldman expects GDP growth in the second quarter of 2015 to hit 3.1%. This comes on the heels of dismal growth in the first quarter of -0.7%. In this coming week, there is a possibility that GDP in the first quarter of 2015 might be revised up to -0.1%.
Hatzius believes that the U.S. dollar thus far has trimmed 0.5% from GDP growth in 2015. In the first quarter alone, trade contribution was adversely impacted by -1.9%. Considering how volatile trade data is, he believes the drag on overall GDP later this year might not be as significant.
But Hatzius thinks the stage is set for continued U.S. dollar appreciation. Interest rates in the U.S. are still higher compared to Europe, and his team believes the euro is apt to fall to parity and potentially below.
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