Imagine the press letting a Republican or conservative get away with trying to avoid uncondtionally calling something as infuriating and outrageous as the Veterans Administration waiting list scandal a real scandal.
Note: This “live blog” post originally appeared just after 7:30 a.m., and will be periodically updated before and after the GDP report’s release.
In April, following third- and fourth-quarter 2013 performances which came in at annual rates of 4.1 percent and 2.6 percent, respectively, and sustained bouts of rough winter weather around much of the country in January and February, the consensus prediction was that the government’s first report on first-quarter 2014 growth would show that the economy grew at a 1.1 percent annual rate.
The actual reading was the lowest possible positive result, i.e., an annual rate of 0.1 percent. Growth in personal consumption was weaker than expected. Fixed business investment exclusive of inventories declined. Exports fell sharply.
In the past few weeks, additional government and other reports have indicated that the first quarter was even weaker than initially thought.
- Bloomberg — “U.S. gross domestic product contracted 0.5 percent in the first quarter, according to economists surveyed by Bloomberg. ” That’s on an annualized basis.
- Business Insider also has a contraction of 0.5 percent.
- An Associated Press item Wednesday evening predicted a 0.7 percent decline.
- (7:55 a.m.) MarketWatch and the Wall Street Journal have contraction predictions of 0.6 percent.
What to watch for:
Other economic reports released in the past few weeks point towards an upward GDP revision in personal consumption of goods, a downward revision in exports, and a bigger hit from inventories.
The report will be here at 8:30 a.m.
Other pre-release commentary:
- The New York Post’s John Crudele (“Grim, dim & puny”) dishes out a heavy dose of sarcasm — “don’t worry – it was the snow and the cold and, you know, things that only God can control.”
- CNBC’s Patti Domm (“Here’s why markets should look past negative GDP”) — “First-quarter GDP could ultimately be revised to a positive number in the third and final reading next month.” Domm also quotes an Deutsche Bank’s chief U.S. economist Joseph LaVorgna predicting 4.2 percent annualized growth in the second quarter.
HERE IS THE REPORT (full tables link): The overall number is worse than anyone thought —
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 1.0 percent in the first quarter according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.
The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. 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 decrease in real GDP in the first quarter primarily reflected negative contributions from private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures. Imports, which are a subtraction in the calculation of GDP, increased.
… The downturn in the percent change in real GDP primarily reflected a downturn in exports, a larger decrease in private inventory investment, and downturns in nonresidential fixed investment and in state and local government spending that were partly offset by an upturn in federal government spending.
… Profits from current production (corporate profits with inventory valuation adjustment (IVA) and
capital consumption adjustment (CCAdj)) decreased $213.4 billion in the first quarter, in contrast to an increase of $47.1 billion in the fourth.
Here is how the contributions to GDP changed by major component:
By far the biggest revision was in inventories. This may be weather-influenced, but the disappointing Christmas shopping season may also have weighed on many retailers who have decided to keep their on-hand stocks at minimal levels.
- Associated Press — “The U.S. economy was battered even more than first suspected by the harsh winter, actually shrinking from January through March. But economists are confident the contraction was temporary.”
- Bloomberg — “The last time the economy shrank was in the same three months of 2011. The median forecast of economists surveyed by Bloomberg called for a 0.5 percent drop. A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed.”
- Reuters via CNBC (“Frigid winter takes toll as US GDP contracts for first time in 3 years”) — “The U.S. economy contracted in the first quarter for the first time in three years as it buckled under the weight of a severe winter, but there are signs activity has since rebounded.”
- Wall Street Journal — “Most economists predict the U.S. economy will bounce back in the second quarter, though it isn’t clear how strong of a rebound is in the works. Gauges of industrial production, retail sales and durable-goods orders all rose in February and March before weakening in April. Even if it is temporary, the first-quarter downturn reflects a pattern seen repeatedly over the past five years. The worst recession since the Great Depression ended in June 2009, but the economic recovery has struggled to gain traction.”
- Zero Hedge — “if one excludes the artificial stimulus to the US economy generated from the Obamacare Q1 taxpayer-subsidized scramble, which resulted in a record surge in Healthcare services spending of $40 billion in the quarter, Q1 GDP would have contracted not by 1% but by 2%!”
Note: Post-release analysis will be deferred until after a review of today’s GDP release.
- Business Insider — 317,000 seasonally adjusted claims, down from 326,000 last week.
- Bloomberg — 318,000
Seasonal Adjustment Factors:
- Week ended May 24, 2014 — 90.7
- Week ended May 25, 2013 — 91.2
- Week ended May 17, 2014 — 286,590 (before likely revision)
- Week ended May 25, 2013 — 319,508
To meet or beat the Business Insider prediction, raw claims will need to be 289,000 or lower (289K divided by .912 is 317K, rounded). That would be barely more raw claims than the previous week.
The Department of Labor’s report will be here at 8:30.
UPDATE: The seasonally adjusted number is 300,000. More later.
A bit delayed, but here we go:
– Memorial Day
– V.A. Hospitals
– Senator Jay Rockefeller
– Prince Charles
– Putin and Hitler
– Congressman Joe Garcia
– Jay Leno
Best Lines (among many):
- “The White House is under fire for long wait times at most VA hospitals. And the administration promised to get help quickly to all our veterans, just as soon as they get around to telling the whole truth on Benghazi.”
- “Speaking at an awards ceremony in Israel, Jay Leno made fun of President Obama and John Kerry. But don’t worry, Jay. It’s not like Hollywood can take the Tonight Show away from you again.”
This open thread will stay at or near the top today. Rules are here. Possible comment fodder may follow. Other topics are also fair game.
Go here for the English version of the original Chinese story.
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