The fourth quarter of 2013 produced a GDP of 2.6%. The preliminary number for the GDP in the 1st quarter of 2014 shows an increase of .1%
Economists polled by Reuters had expected growth to slow to a 1.2 percent rate. The slowdown partly reflected an unusually cold and disruptive winter, marked by declines in sectors ranging from business spending to home building.
Then four paragraphs later:
Economists estimate severe weather could have chopped off as much as 1.4 percentage points from GDP growth. The government, however, gave no details on the impact of the weather.
Are these the same economist who predicted the GDP would slow to 1.2% because of the weather or are these a different group of economists, who after the release of the numbers decided to claim the harsh winter “chopped off” GDP growth? Because if it’s the same group, that means they were expecting growth to be in the 3% range if not for the weather. This number is a huge miss.
While consumer spending increased by 3.0% CNBC notes:
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.0 percent rate, reflecting a spurt in spending on services linked to the Affordable Healthcare Act.
Spending on goods, however, slowed sharply, indicating that frigid temperatures during the winter had reduced foot traffic to shopping malls. Consumer spending had increased at a brisk 3.3 percent pace in the fourth-quarter.
Harsh weather also undercut business spending on equipment. While investment in nonresidential structures, such as gas drilling, rebounded, the increase was minor.
The Wall Street Journal tends to concur regarding consumer spending:
The weather likely slowed consumer spending on goods, which rose at a mere 0.4% pace during the quarter. But households spent more on sevices–including energy to heat their homes and health care–causing total consumer consumption to rise at a 3.0% pace, only slightly below the fourth quarter’s 3.3% rate.
Regarding business spending, not so much:
However, business spending on items such as equipment, buildings and intellectual property fell at a 2.1% pace in the first three months of the year. That was the first decline in a year and reversed in part the 5.7% gain the prior period. The slowdown in investment coincided with weaker hiring during the quarter.
It’s as simple as this, a healthy economy should not stall because of the weather. This is what you get from the slowest jobs recovery since the Great Depression .
That’s because we keep treating economic symptoms rather than stagnation’s causes. We add regulation where we should be eliminating it, we offer short-term incentives that end up subsidizing normal behavior, and our tax and regulatory policies keep capital sidelined. The massive expansion of hiring costs have employers looking to pare down, so consumers have less money to spend and less reason to take their own risks.
Like Richard III, this administration does not understand the consequences of its actions or inactions.
This is just the first estimate of the 1st Quarter GDP and I do not doubt there will be an upward revision of this number. Not because of my faith in the economy, no I have faith in the administration providing good numbers….. no matter what.