Drought to slow U.S. GDP growth: Macroeconomic Advisers

11.09.2012 [16:12]
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Baku, September 11 (AZERTAC). Macroeconomic Advisers lowered its third-quarter forecast of GDP growth 0.5% to 1.5% on Monday, citing expectations for a sharp, drought-induced drop in farm inventories beginning in the third quarter.

The U.S. Drought Monitor estimates that up to 80% of the contiguous 48 states faced moderate to exceptional drought conditions over the summer.

A lack of rain coupled with high temperatures severely damaged corn and soybean crops. The U.S. Department of Agriculture expects the corn harvest to fall 13% from last year’s crop, and expects the soybean crop to fall 12%.

“While the farm sector directly accounts for only about 1% of the U.S. economy, the hit to farm output is likely to be large enough to have a noticeable impact on U.S. GDP,” said Macroeconomic Advisers in a press release. “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.”

Drought to slow U.S. GDP growth: Macroeconomic Advisers

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