When the U.S. economy contracts the most it has since the depths of the worst recession since the Great Depression, the White House starts looking for ways to fill the glass.
Remember that unusually severe winter weather?
And so it was today, with the latest revision of first quarter 2014 gross domestic product: A 2.9 percent decline on an annualized basis — the worst reading since the first quarter of 2009.
The report of the Commerce Department was quickly followed by a five-talking points note from the White House, where Jason Furman, chairman of the Council of Economic advisers noted that: “The GDP data can be volatile from quarter to quarter; a range of other data show a more positive picture for the first quarter, and more up-to-date indicators from April and May suggest that the economy is on track for a rebound in the second quarter. ”
1) The 2.9 percent decline follows a GDP increase of 3.4 percent in the second half of 2013. Two big factors for the decline, a decline in exports and slowdown in inventory investment, are “particularly volatile components” of the index. Plus “unusually severe winter weather” must be taken into account.
2) Revisions in first quarter estimates “have been historically large.”
3) Several other measures are more positive: Aggregate hours worked by private-sector employees grew by 1.4 percent in the first quarter, industrial output increased 2.1 percent. Given this, one would have expected to see GDP growing by 2 percent or more.
4) Again, the weather: “Severe weather had a disruptive effect that only began to abate at the end of the quarter.” Vehicle sales, retail and food service sales and other measures that dipped starting in December and/or January didn’t start rebounding until March.
5) Health care prices rose “exceptionally slow,” while utilization of services fell, “leading to an outright decline” in annualized spending. “Thanks in part to the Affordable Care Act,” slow growth in health care costs is “making easier for businesses to hire workers or pay a good wage and improving the nation’s fiscal outlook.”