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Marketplace Morning Report

GDP suffers what’s becoming a seasonal slowdown

Nova Safo Apr 29, 2015
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Growth of the U.S. gross domestic product, a broad measure of the economy, ground almost to a halt in the first three months of the year, growing just 0.2 percent, even lower than expected.

A number of temporary factors, economists and analysts say, account for the first quarter slowdown, including: a West Coast port slowdown that caused a backlog of exports, a slowdown in exports themselves due to a strong dollar, and reduced consumer spending, which might be at least partly accounted for by a second year of bad winter weather.

“Spending on mining, exploration and wells, a.k.a energy, is down 48.7 percent — that is a big number,” says Guy Lebas of Janney Montgomery Scott. The reason for that is oil prices. They are down, and so is investment in that sector.

Weather is another big culprit for slowing GDP growth, Jim O’Sullivan of High Frequency Economics says. “The weather was unusually severe this winter, as it was last year, so that’s part of what’s happening,” he says.

Bad weather affected consumer spending, which grew 1.9 percent in the first quarter, compared to the previous quarter’s 4.4 percent growth.

But the effects of winter weather, aside from unusually severe weather, are supposed to be accounted for in the GDP numbers, says Justin Wolfers, a senior fellow at the Peterson Institute for International Economics.

“Government statisticians actually seasonally adjust the data,” Wolfers says.

Wolfers examined that adjustment of the last 30 years, and found a pattern. “The estimate of GDP growth in the first quarter has consistently been lower than on all the other quarters,” he says, adding that could mean the seasonal adjustment is off.

Statisticians haven’t significantly changed the seasonal adjustment algorithm (although they’ve tweaked it) in decades, he says. In fact, Wolfers says there is a lot more consistency in yearly GDP numbers.

“The yearly numbers have been remarkably consistent,” he says. “They’ve suggested that this is an economy that keeps growing.”

Jim O’Sullivan says to put the first-quarter GDP numbers in context, he is also watching jobless claims. “Over time, if there is significant slowing in the trend in GDP, invariably you see an uptrend in claims.” So far, he says, such an uptrend has not occurred.

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