U.S. Economy Will Weather a Weak First Quarter

May 29, 2014 12:22 PM
By Milton Ezrati

Shocking as the first-quarter GDP release looks on the surface, it still is no big deal.

The Commerce Department’s release of revised first quarter GDP figures on May 29 offered a negative surprise.  Though the pattern of monthly data since the preliminary GDP estimate of 0.1% annualized real growth have led many to suspect that the figure could be negative, the reported decline of 1.0% went further than most any forecaster expected.  Yet, the picture still is one of temporary weather-related problems that have little bearing on the future. 

The biggest revisions occurred in construction, which is notoriously weather sensitive.  Spending on commercial structures went from an initial estimate of a low 0.2% rise to a 7.7% annualized drop.  For the rest, the figures were still slow or slightly down, but showed no substantive difference from the picture the initial release painted a month ago.  More important, final sales still showed an annualized 2.0% real growth rate, very much in line with the recovery’s trend.

On this basis alone, it would be a mistake to extrapolate economic weakness going forward.  Further, other timelier releases suggest that something of a catch-up will occur this spring.  Housing construction, for example, showed a strong advance of 8.0% for the month alone, and though retail sales in April disappointed, strength in March showed that the earlier problems have had no lasting effect.  Though it would equally be unwise to extrapolate this catch-up as a fundamental acceleration, the overall picture remains one of sluggish growth, but growth nonetheless. 

What do you think the first-quarter GDP figures signal for the U.S. economy? Let us know in the Comment section, below.

Milton Ezrati is Partner, Senior Economist and Market Strategist for Lord Abbett.

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1 comment
I happen to think this is right on the money. In regards to "sluggish growth, but growth nonetheless," I stick with my own thesis still- after a massive sell-off in '08- a rapid or "too-fast" recovery would likely have not given the economy and most highly affected industries the proper time or motivation to correct and improve. Thus, a slow but steady recovery in this case is just what the doctor ordered.