Weak dollar, spending cuts, GDP dips, gas prices soar | BrainerdDispatch.com | Brainerd, Minnesota

Weak dollar, spending cuts, GDP dips, gas prices soar

Posted: February 3, 2013 - 10:51pm

Just when the U.S. economy seemed to be gaining steam, a report from the Commerce Department came howling across the frozen economic tundra noting that the 2012 Gross Domestic Product contracted 0.1 percent in the year’s final quarter. Big whoop! It is, I’m afraid a big whoop. It’s the first setback to a slow economic recovery since 2009.

On top of that, a lower defense budget caused many defense contractors to start laying off workers in anticipation of the fiscal cliff (which was temporarily averted) and the likelihood of sequestration.

Sequestration, if it is realized in the final budget battle will demand more defense department cuts and across the board cuts to every segment of the federal government. (It’s a concern that new Secretary of Defense Chuck Hagel will have to contend with when he takes over.)

Payrolls were up 157,000 for the first month of 2013, while the unemployment rate edged higher to 7.9 percent. Economists were hoping for 160,000 new jobs created with the unemployment rate holding steady at 7.8 percent.

Oh, rising gas price will continue to climb another 10 to 20 cents a gallon, according to reports last week. Cause? Refineries have cut production of winter blend. Collusion, anyone?

With all of the bad news, there was a mixed message that surfaced with Reuters reporting that the Euro was at a 14-month high against the U.S. dollar. How is that positive? Well, because most nation’s within the European Union also make up our largest trading block. Therefore, with a weak U.S. dollar, our goods will be extremely attractive to that marketplace.

There is a downside of course, with a weakened dollar, goods from China, Japan and Europe will be more expensive for Americans.

How does that impact Brainerd, Baxter and the rest of Crow Wing County? It will cause a spike in goods from other nations that are sold in area retail outlets. It also poses a threat to our national recovery from the Great Recession.

While we would prefer a strong dollar to buy the essentials from other nations, we are faced with growing inflation on most fronts.

Most county residents have been experiencing the inflationary effects at the pump and in the aisles of local grocers.

Keith Hansen