The big economic news from yesterday was certainly the downwards revision of first quarter 2014 GDP by the Bureau of Economic Analysis:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2013, real GDP increased 2.6 percent.
The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, real GDP was estimated to have decreased 1.0 percent. With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was smaller than previously estimated, and the decline in exports was larger than previously estimated (for more information, see “Revisions” on page 3).
At this point I think that it would be premature to forecast that the recovery, such as it has been, has ended and we are now settling into a recession. Rather than continue decline in economic activity I think things are largely pretty flat.
That’s very much consistent with the reports from the National Retail Federation which tends to have its ear pretty close to the ground. April retail sales were flat as were May retail sales. Their take is that consumers are tightening their belts which may, indeed, signal more contraction to come, possibly in the third quarter. I may try to look at manufacturing and exports to see if I can get any advance indications there.
Washington tends to be reactive rather than proactive so I guess it’s not surprising that nobody, from the White House to the Congress, is actually proposing anything that might increase economic activity. Neither is it surprising that supporters of the White House are continuing to blame the first quarter’s decline in economic activity on bad weather. That explanation will ring increasingly hollow with flat growth in the second quarter or declines to come.