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June 25, 2014

First Quarter GDP, Third Estimate: Negative 2.9%

It was cold in January, you see. Unexpectedly. It just snuck up on us.

Kratatoa noted in the sidebar that "even Reuters can't spin this." Well, they do give it a go, trotting out the "but the economy has grown like gangbusters since then!" spin they've offered since the first estimate of the first quarter GDP, back in April.

Every news outlet bought into the report's spin, even Fox:

Economists say most of the factors that held back growth in the first quarter have already begun to reverse. Most expect a strong rebound in growth in the April-June quarter.

Apparently this nonsense is based upon other findings in the report (which has since been revised way down, twice). So, consumer spending increased by 6% in March. So, in March, people spent more after not spending as much in the cold winter.

From these data they derive the prediction: The economy is going to be doing great in the second quarter!

No matter how many times they revise down the January to March headline figures, these guys continue claiming that the first-draft estimates for a single month (March) are where the real story is.

And so it continues:

The U.S. economy contracted at a much steeper pace than previously estimated in the first quarter to record its worst performance in five years, but there are indications that growth has since rebounded strongly.

The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, instead of the 1.0 percent pace it had reported last month.

While the economy's woes have been largely blamed on an unusually cold winter, the magnitude of the revision suggests other factors at play beyond the weather.

Now, should they be continuing to rely on those secondary numbers about consumer spending and such?

Seems not:

...

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.0 percent rate. It was previously reported to have advanced at a 3.1 percent pace.

Exports declined at a 8.9 percent rate, instead of a 6.0 percent pace, resulting in a trade deficit that sliced off 1.53 percentage points from GDP growth. Weak export growth has been tied to frigid temperatures during the winter.

Yes it's all tied to a couple of weeks of snow.

Corrected: I wrote initially that the estimate was "final." But another article says there will be one more bite at this rotten apple.

Here's some spin:

From Moneywatch:

GDP data provide new view into a brutal winterís costs

KRCR TV:

3 reasons not to freak out about -2.9% GDP
Much of first quarter downtown due to brutal winter though, economists say

That's very deceptive. Some of the downturn was due to that; but they want to spin it as "most." But they can't say "most" as it's plainly not true (and that's a spin most have retreated from). So they say "much", which actually means "some," but sounds an awful lot to most ears like "most."

CNN Money/Yahoo:

Here's why economists will shrug off a dismal GDP report

By the way, both of those headlines run above articles by Annalyn Kurtz. She's the one who penned the article that ran with the infamous headline...

U.S. Economy Shrinks, But It's No Big Deal

... about the second revision, down to -1.0%.

It's still no big deal to Ms. Kurtz. They could revise it down to -4% and she'd still write the headline, "US Economy in Death-Spiral But It's Totes Nothing."

How The Media Reports a Democratic Economic Disaster: Great piece by Sean Davis with a great joke at the end.



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posted by Ace at 12:47 PM

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