Newspaper article International New York Times

U.S. Revises Data and Finds Decline in 1st Quarter ; Data Confirm an Inability to Generate Momentum, with Hard Winter a Factor

Newspaper article International New York Times

U.S. Revises Data and Finds Decline in 1st Quarter ; Data Confirm an Inability to Generate Momentum, with Hard Winter a Factor

Article excerpt

The revision downward for the first quarter, which was expected after a brutal winter, underscores the American economy's seeming inability to generate much momentum.

The United States economy got off to an even weaker start this year than first thought, the government reported Friday, as economic activity contracted amid disappointing trade activity and continued caution by businesses and consumers alike.

The 0.7 percent annual rate of decline in economic output in the first quarter of 2015 was a reversal of the initial 0.2 percent advance for the period reported last month by the Commerce Department.

While statistical quirks and one-time factors like wintry weather in some parts of the country played a role, as did a work slowdown at West Coast ports, the lackluster report for January, February and March underscores the American economy's ongoing inability to generate much momentum.

The pullback marked the third time economic activity has posted a quarterly contraction since the current recovery began in mid-2009, with declines in output in the first quarter of 2011 and 2014. Even taking account of flaws in the way the government calculates expected seasonal variations, that on-again, off-again pattern helps explain why annual growth rates in recent years have been well below the pace of gains recorded in the 1990s and mid-2000s.

Much of the revision was spurred by fresh data showing exports fell more than first thought and imports rose, with economists at Goldman Sachs noting that the change in the trade balance shaved 1.9 percentage points off overall growth last quarter, the largest quarterly drag from net exports in three decades.

Volatile even in the best of times, the trade balance is especially hard to gauge in the wake of the ports dispute. Although clearly a negative in the first quarter, some experts like Ian Shepherdson of Pantheon Macroeconomics say a return to normal trade patterns could fuel a healthy rebound in the second quarter.

But he cautioned the data remain in flux and warned that even his own forecasts could end up being off.

"Anybody estimating gross domestic product for the second quarter is kidding themselves, because the trade data is so unpredictable at the moment and we have no hard numbers yet," Mr. Shepherdson said. "I'm guessing there will be a reversal in trade flows and we'll see 3 percent in the second quarter but it could be anywhere between 1 percent and 5 percent. …

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