What Recovery? GDP Barely Grew Last Quarter
First-quarter gross domestic product growth — or lack there of — will shine a new light on the state of the United States’ economic recovery.
“Here’s why I’m not so worried about Q1 GDP: The components that are weak aren’t persistent, while those that are strong tend to persist,” tweeted Justin Wolfers, a senior fellow at the Brookings Institution, ahead of the Department of Commerce’s Wednesday release of its initial estimate of first-quarter gross domestic product growth, which is arguably the most important indicator on the health of the country’s economy. But regardless of Wolfers’ confidence that strong economic trends persist, the winter’s harsh weather did have its expected impact on the quarter. United States GDP growth slowed to just 0.1 percent from January through March, which is the weakest growth on record since the end of 2012.
The initial estimate of first-quarter GDP is also far lower than the 1.2 percent rate expected by economists and a significant decline from the 2.6 percent rate of growth recorded in the final three months of 2013. Back in January, the Department of Commerce calculated that gross domestic product — the broadest measure of economic activity — expanded at a 3.2 percent annualized rate, with a significant increase in real personal consumption expenditures driving the growth. But upon further analysis, using “more complete source data” than was available when the advanced estimate was made earlier this year, government economists determined that consumer spending was not as strong in the fourth-quarter as previously thought, forcing a downward revision of fourth-quarter GDP.
Still, even at that lowered level, the nature of the quarter’s growth suggested underlying strength in the economy, especially as consumer spending increased significantly and the pace of business restocking was not as robust as previously estimated.
In a sense, first-quarter data proved that point. Or, as Wolfers tweeted, “It’s a measure of how robust the recovery is that even an extremely weak Q1 won’t revive talk of a double-dip [recession]. The recovery will continue.” Consumers were big spenders in the first-quarter, propping up growth as they have for much of the recovery. But other sectors of the U.S. economy that have buoyed the recovery higher in recent quarters slumped in the early months of this year, dragging down growth, with much of the hurt brought on by the frigid winter weather. That reality left personal consumption expenditures as the single biggest boost to economic output in the first three months of the year.