The US economy has had its worst performance in five years. The final GDP shows the economy shrank 2.9%. A performance so bad they can’t blame the weather as the administration previously attempted. From CNBC:
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.
This is the largest difference between the second and final estimates of the GDP since 1976 and represents the largest “non-recession” drop in 50 years.
So what happened?
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 6.0percent 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.
Now, some in the media are already saying “this is old news” and are claiming there will be a significant bounce back in the second quarter.
Most likely not:
A separate report showed orders for long-lasting U.S. manufactured goods unexpectedly fell in May, suggesting an anticipated rebound in growth this quarter could fall short of expectations, even as a measure of business capital spending plans rose.
Last week, Fed policymakers cut the growth forecast from 2.8%-3% to 2.1%-2.3%.
Meet the new summer of recovery, same as the old summer of recovery.