Cold winter keeps getting colder, even in June: GDP growth revised down again
I don’t get it. On one hand, the Administration loudly insists that global warming is the greatest threat facing both America and the world. Even the people getting beheaded by ISIS in Iraq are supposed to be worried about it. But then the same government and its supporters tell me that the economy contracted in the first quarter of 2014 because, for the first time in history, winter was really cold.
It’s was so cold that it’s still getting colder, because Q1 growth was just revised down again… and the crash was freaking huge. The “experts” were muttering about a drop from the old -1.0 percent figure (which started out as whisker-thin 0.2 percent growth) to perhaps -2.0 percent. But the Commerce Department just released the figures, and it turns out GDP contracted by a horrifying -2.9 percent.
Man, if that was all due to the cold winter, people must have been cutting their tauntauns open and crawling into their carcasses to survive.
“And you thought Wall Street smelled bad from the outside!”
Of course, it’s now time for the same gang of charlatans who claim every single piece of bad economic news since Barack Obama took office was “unexpected” to assure us that a possible recession is actually a good thing. Happy days are here again! To its credit, Fox Business spares us the “unexpected” nonsense and goes with the far more accurate label “unprecedented” for the worst performance in five years, and the largest contraction ever recorded outside of a full recession:
The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, the economy’s worst performance in five years, instead of the 1.0 percent pace it had reported last month.
While the economy’s woes have been largely blamed on an unusually cold winter, the magnitude of the revisions suggest other factors at play beyond the weather. Growth has now been revised down by a total of 3.0 percentage points since the government’s first estimate was published in April, which had the economy expanding at a 0.1 percent rate.
The difference between the second and third estimates was the largest on records going back to 1976, the Commerce Department said.
Economists had expected growth to be revised to show it contracting at a 1.7 percent rate. Sharp revisions to GDP numbers are not unusual as the government does not have complete data when it makes its initial and preliminary estimates.
If you want the undiluted bathtub-gin flavor of happy juice, check out CNN merrily declaring “This recovery is underway.” It’ll be even more underway if we contract again and officially slip into a recession, right? It was kinda chilly in April too… [Cue sinister music.]
We can all join in hoping that the second quarter is a lot better than Q1 was, although we’re obviously not going to get anywhere near the annual growth “experts” were predicting, or that we need. In context, Q1 will probably shake out as an extraordinary weak period in a “meh” year – which is not what the weak, high-unemployment Obama economy needed. What encouraging signs does Fox Business see out there?
The latest revisions reflect a weaker pace of healthcare spending than previously assumed, which caused a downgrading of the consumer spending estimate. Trade was also a bigger drag on the economy than previously thought.
The economy grew at a 2.6 percent pace in the final three months of 2013. With the first quarter in the rear view and the April-June period looking stronger, investors are likely to ignore the report.
Data such as employment, manufacturing and services sectors point to a sharp acceleration in growth early in the second quarter. However, the pace of expansion could fall short of expectations, which range as high as a 3.6 percent rate.
Economists estimate severe weather could have slashed as much as 1.5 percentage points from GDP growth in the first quarter. The government, however, gave no details on the impact of the weather.
Well, fancy that. Nobody can give any details on exactly how the ostensibly coldest winter in U.S. history actually produced all the negative economic phenomena routinely blamed upon it.
But I’m confused again, because not long ago the White House was proudly boasting of increased health care spending boosting those consumer numbers. Now it turns out healthcare spending was weaker than they expected… and that’s why GDP cratered. So did it increase, or decrease? is decreased health care spending a good thing, or not? (In truth, healthcare spending tends to be driven by the general state of the economy and employment, rather than serving as a primary driver of economic growth. Crappy economy tends to mean less spending, under just about any model of health care distribution.)
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.0 percent rate. It was previously reported to have advanced at a 3.1 percent pace.
Exports declined at a 8.9 percent rate, instead of 6.0 percent pace, resulting in a trade deficit that sliced off 1.53 percentage points from GDP growth. Weak export growth has been tied to frigid temperatures during the winter.
Businesses accumulated $45.9 billion worth of inventories, a bit less than the $49.0 billion estimated last month. Inventories subtracted 1.70 percentage points from first-quarter growth, but should be a boost to second-quarter growth.
A measure of domestic demand that strips out exports and inventories expanded at a 0.3 percent rate, rather than a 1.6 percent rate.
So domestic activity is, if anything, even weaker than it looked at first. That’s wonderful news. We’re more “poised for recovery” than ever!
Well, at least we’re not facing a foreign crisis that could drive energy prices through the roof, a tidal wave of illegal immigrants pouring over the border, the impending activation of more job-killing mandates in a shifty health-care scheme, political pressure to hike the minimum wage, or a crisis of confidence in a lawless government. Then we’d really be in trouble, even after the coldest winter this side of Pluto receded.