By conventional standards, two consecutive periods of shrinkage in the Nation’s gross domestic product (GDP) indicates a recession. The Commerce Department Bureau of Economic Analysis released its revised assessment of first-quarter GDP growth on Thursday, and the numbers suggest we’re halfway there.
According to the Bureau’s revised analysis, the U.S. economy contracted by 1 percent in the first quarter of 2014. Thursday’s revision represents a small but significant reversal of the Bureau’s earlier estimate, which anticipated the economy would have grown by a stagnant .1 percent during the first quarter.
“The GDP estimate released today is based on more complete source data than were available for the ‘advance’ estimate issued last month,” the Commerce Department stated. “In the advance estimate, real GDP was estimated to have increased 0.1 percent. With this second estimate for the first quarter, the decline in private inventory investment was larger than previously estimated.”
The announcement comes on the heels of speculation among financial pundits that the news would be bad, but not that bad. Consensus among experts following last month’s Commerce report was marginally more hopeful, but Thursday’s report was “worse than the most pessimistic forecast in a Bloomberg survey of economists,” according to Bloomberg.
The Administration of President Barack Obama has blamed the contraction on a harsh winter, and many economists indeed received Thursday’s news with circumspection. “Inventories were the biggest negative, and this highlights a subtle change in how the economy works,” the American Enterprise Institute’s Kevin Hassett told The Washington Post. “Because of just-in-time inventory management, the economy is much more sensitive to bad weather than it used to be. Inventories are not sitting on shelves, they are in trucks. If the trucks get stuck, so does the economy.”
But The Post’s Jennifer Rubin followed that with this:
President Obama will no doubt claim it’s because they haven’t spent enough money, but that old saw isn’t fooling many people. Between a high corporate tax rate that discourages investment in the United States, Obamacare (effectively taxing labor and directly taxing medical device companies), an out-of-control Environmental Protection Agency, restrictions on domestic energy development and long-term debt hanging over us, this shouldn’t be a surprise.
Of course, the weather holds no influence over any of those things.
The economic contraction marks the first net decline in GDP in three years. And the GDP wasn’t the only indicator that performed poorly in the first quarter: Gross domestic income shrank by 2.3 percent.
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