Posted on 04/29/2015 10:16:22 AM PDT by SeekAndFind
The economic experts had anticipated the slowdown of the US economy to continue in the first quarter of 2015, after the 5.0% annualized real GDP growth in the 3rd quarter of 2014 slipped to 2.2% growth in the 4th quarter, with the consensus being +1.0% growth this past quarter. The bad news – it slowed down to 0.2%:
Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 0.2 percent in the first quarter of 2015, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.
The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the first quarter, based on more complete data, will be released on May 29, 2015.
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and private inventory investment that were partly offset by negative contributions from exports, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
Reuters and the AP found creative ways to avoid using the “unexpectedly” word. First, Reuters’ lede:
U.S. economic growth braked more sharply than expected in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending, but there are signs activity is picking up.
Gross domestic product expanded at an only 0.2 percent annual rate, the Commerce Department said on Wednesday. That was a big step down from the fourth quarter’s 2.2 percent pace and marked the weakest reading in a year.
A strong dollar and a now-resolved labor dispute at normally busy West Coast ports also slammed growth, the government said. The weak growth, though probably temporary, reduces the chances of a June interest rate hike from the Federal Reserve.
While the Reuters dispatch did not offer any real evidence economic activity is actually picking up, they did mention economists’ claims that the weather in February knocked a half-percentage point off GDP growth, that the West Coast ports dispute knocked off 0.3 percentage point, and that the drastic 48% drop in spending on mining and drilling equipment was a result of “front-loading” the cuts into the first quarter.
The AP dispatch, while offering the same platitudes on actual GDP growth in the future, is more pessimistic on a closer read:
The government’s first look at economic growth for the first quarter, as measured by the gross domestic product, came as the Federal Reserve wrapped up two days of discussions on interest rate policies. While the economy can brush off the temporary factors behind the slowdown, it will have to contend with ongoing challenges like the strong dollar for some time….
The first quarter figure was much worse than economists had expected. But analysts are still looking for a solid rebound for the rest of the year, similar to what happened in 2014.
The economy contracted in the first three months of 2014, also due to a harsh winter. It was then followed by a strong rebound to growth of 4.6 percent in the spring and a jump of 5 percent in the third quarter.
Dan Greenhaus, chief strategist at BTIG, believes the first quarter will prove to be the year’s low point, though acknowledges that the momentum so far isn’t as strong as last year.
“Admittedly, the data does not yet support the type of snapback seen in 2014 but more growth is better than less and we expect that to occur this year,” he said in a note to clients.
Reuters and the AP did note that the change in private inventories contributed a rather high +0.74 percentage points to the change in GDP, and that, despite the spin in the BEA press release quoted above, personal consumption expenditures slowed down to an inflation-adjusted 1.9% increase, for an unmentioned +1.31 percentage-point contribution to the change in GDP. They, however, missed the big news on the personal expenditure front. Tom Blumer noticed that spending on health care posted its third consecutive quarter of +0.50-or-greater contribution to GDP change, providing a +0.62 percentage-point change this past quarter. That is nearly half of the entire PCE contribution to GDP change. I guess ObamaCare is not exactly bending the cost curve down.
One more item – lest one thinks the disappearing GDP growth is just an American problem, ShareCast (via Yahoo Finance UK) reported earlier this week that, at an unannualized +0.3% (or an annualized 1.2%) growth in the 1st quarter of 2015, Britian just had its worst quarter-on-quarter GDP growth since the 4th quarter of 2012.
This is all George Bush’s fault.
/sarc
Unexpected...
You know, we are headed into the Summer of Recovery (6).
The big turn-around is just ahead... up his... well never-mind.
No, they’ve run dry on Bush... It’s former President Weather’s fault!
The takers are outnumbering the producers. Give and it shall be given unto you. Continually demand more be given you and you will never have enough. Never.
Not only that. Those that conscientiously prepare for their futures are cutting back on spending, in anticipation of zero or negative interest rates on savings forever.
Spending does not create prosperity or growth. Savings and investment does.
Twice I heard on the radio that it was the super-cold weather to blame. But.... Weeks ago, the same ABC radio station said, “You may feel really cold here in the east, but it’s been super warm in the west, and that means that we’ve had yet another year of global warming.”
Amazing.
Any scientific theory that explains everything explains nothing, and no matter what happens in climate is unpleasant, the word for that is weather, and to the wackos like Al Gore, it is always attributed to that all catch term — global warming.
So, If we continue global warming up here in the northeast, we’re going to freeze to death.
I’ve stated this before both here more recently, and when I co-hosted an investment radio show in 2009-10.
It’s Deflation.
and
Deflation is a B*tch !!!
The Fed isn’t stupid. They know this stuff.
The Fed and Central Bankers around the world use the ONLY TOOL they have available to fight Deflation. That tool is to create Inflation by artificially suppressing interest rates with QE* etc.
Their hope is or was that the low rates would stimulate economic activity long enough for “Something” to come along that would truly expand/transform our economy. That “Something” hasn’t arrived and their policy of QE* has only temporarily slowed the deflationary death spiral. The Fed was/is trying to buy some time between the last and the next bubble.
Personally, I can’t blame them for trying. What would you do if in their position?
In 2009, they could have done nothing and watched the economy go into a full blown depression (I’m talking 1930’s style depression or worse), or try QE. Their QE efforts seemed to stabilize things and once started, they became trapped by this policy.
That Something?
Any study of our, therefore the worlds, economies over the past 200 years would lead you to conclude that real growth has only occurred when there was a technological breakthrough. There have only been a handful of these transformative events. There have been decades of growth that were built on those core breakthroughs followed by economic contraction until the next breakthrough.
We are long into the tail end of the most recent transformative event which was the “Integrated Circuit”. Everything from PC’s to the Internet to Cell phones, smart phones etc are simply an extension of the IC. I’m not suggesting there won’t be additional advances made, I’m suggesting that none of them will be transformative.
Our economy is toast.
The few things that I see on the horizon that can reverse the deflationary cycle?
Green energy which isn’t economically viable at this time.
Nanotechnology, more specifically in the materials field, not quite there yet.
Genetics, again, not there yet.
The latest offering from Apple isn’t going to make a difference. I think it was the 2010 edition of Forbes that listed the “Next Thing” the tech advancements that were going to “Change the world”, they where all based on the extension of the IC and/or were “Social” crap.
When the next REAL breakthrough does occur, the pent up money will flow into it so fast it will make your head spin.
...you know, that progressive turd muffin that thinks borrow and spend till yer anus is bloody is they only way to prosperity?
There has to be a balance of spending and saving for investment and to fuel the economy so there are more jobs.
I just posted this on another thread.
I highly recommend it.
Fight of the Century: Keynes vs. Hayek Round Two
https://www.youtube.com/watch?v=GTQnarzmTOc
It’s a rap song about the economy that is extremely well done.
Let me know your thoughts.
That is EXCELLENT! I suspect it would be clear to even those with next-to-no Economics knowledge.
Yep, Obama and his staff are the ones we were waiting for.
You do realize your first comment was/is pure Keynesian?
I have a number of favorite lines from the video but this is the best.
“The economy is not a class that you can master in college,
to think otherwise is the pretense of knowledge”
When I refer to “spending” I don’t mean public spending. I’m referring to private spending in the local economy. Is Keynesian economics a belief that the gov can spend its way out of all problems?
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