Today’s downward revision to economic growth in the first quarter put America officially into an economic contraction, which is making the “poised for recovery” bilge pumped by Obama defenders more difficult than ever to sell. It’s a relative small revision, and really a 1 percent contraction is not all that much more dismaying than the earlier 0.1 percent growth was. There are few serious concerns that we’ll hit a string of contractions long enough to declare a new recession this year.
Still, the contraction has symbolic power, and the wheezy excuses trotted out by the media to excuse Obama’s policies are getting funnier. Just to make sure you don’t miss the point this whole mess was caused by the astounding discovery that winter is cold, Reuters headlined its report “Chilly 1Q: U.S. Economy Contracts for First Time Since ’11,” added a graph entitled “Frigid First Quarter – U.S. Economy Shrinks as Harsh Weather Strikes,” and opened its report with, “The U.S. economy contracted in the first quarter for the first time in three years as it buckled under the weight of a severe winter, but there are signs activity has since rebounded.”
Got it? Nothing to do with Obama policies. Jack Frost was the culprit. Don’t read too much into five years of weak economic growth, followed by an actual contraction. An insane corporate tax system, constant class-warfare rhetoric, out-of-control deficit spending, and a job-killing health care boondoggle had nothing to do with it. None of the “experts” could possibly have known it would snow this winter; heck, the global-warming nuts told them winter was gone forever.
Try to imagine a Republican with such a dismal economic record – and a penchant for veering off into his expensive personal agenda so often that his “pivots to the economy” have become a running joke – getting his contraction quarter waved off as no big deal, not even worth commenting upon, no more important than that crazy little mix-up about blowing the cover on the CIA chief in Afghanistan.
The economy grew at a 2.6 percent pace in the fourth quarter. U.S. financial markets are likely to shrug off the report, given the temporary factors that weighed down on growth and the fact that economic activity is rebounding.
Data ranging from employment to manufacturing suggests growth will accelerate sharply in the second quarter.
Economists estimate severe weather could have chopped off as much as 1.5 percentage points from GDP growth. The government, however, gave no details on the impact of the weather.
Businesses accumulated $49.0 billion worth of inventories, far less than the $87.4 billion estimated last month.
It was the smallest amount in a year and left inventories subtracting 1.62 percentage points from first-quarter growth. But inventories should be a boost to second-quarter growth.
While the decline in exports was not as severe as initially thought, import growth was stronger. That resulted in a trade deficit that sliced off 0.95 percentage point from GDP growth.
How did the weather make the trade deficit worse? Instead of hoping for the sun to beam warmly upon us this summer (“But not too warmly!” – the Church of Global Warming) maybe should think about some ways to make American businesses more competitive and turn that trade deficit around.
A measure of domestic demand that strips out exports and inventories expanded at a 1.6 percent rate, rather than a 1.5 percent rate, indicating underlying strength in the economy.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.1 percent rate. It was previously reported to have advanced at a 3.0 percent pace.
That’s nice, but it doesn’t really speak of a roaring economic engine preparing for takeoff. A 1.2 percent downward revision from near-zero overall economic growth is no big deal, but exceeding expectations on domestic demand by 0.1 percent means Recovery Summer is here at last, five years after President Obama and his “experts” heralded its arrival? Does it matter that everyone who makes $40k or less just hit a six-month low in consumer comfort, or should we just wave that off as discomfort caused by frigid weather too?
Say, what do you think will happen to domestic consumer and business demand when the next wave of ObamaCare insurance cancellations and rate hikes come crashing down, and employers discover the rules have been quietly rewritten to prevent them from sending their employees into the public exchanges, despite years of Obama’s assurances to the contrary?
Does anyone think the U.S. economy will now grow at well over 4 percent for the next three quarters, to hit the original growth targets for the year? A lot of the predictions for a far better Q2 are based on the belief that Q1 was a bizarre aberration, and all the pent-up economic energy will simply slide into the next three months. Outside of the new-home market, it’s tough to see how cold weather could freeze so much action hard enough to require a 90-day thaw, but we’ll see. Remember to stay seated for two months after the credits roll on “Q2: Contractions of Future Past” to see the special revision stinger!
Update: I mistakenly wrote that the Q1 contraction was 0.1 percent, but it’s actually 1.0 percent annualized. I have corrected the references.