Wednesday, April 30, 2014

Don't freak out about the poor 1st quarter GDP report (except for one thing)

 - by New Deal democrat

So GDP grew by the smallest amount possible, +0.1% annualized, in the first quarter of 2014.

If you've been reading my "Weekly Indicator" series religiously, you know that all through January and February I was reporting that the economy, as measured by the high frequency weekly data, had hit an air pocket.  It recovered in the latter part of March.

This was one of those rare cases where the weather really was a valid excuse, and that's what the late March and April data have been confirming.

So, yes, this was a bad positive number.  But a bad positive number with a perfectly reasonable explanation, that need not carry forward at all.

With one exception.  And that is the line that reads, "Real residential fixed investment decreased 5.7 percent, compared with a decrease of 7.9 percent" in the fourth quarter of 2013.

According to UCLA Prof. Edward Leamer, a decline in real residential fixed investment as a share of GDP is the first warning sign of a recession about 5 quarters out.  With a decline of two quarters in a row, the outlook for 2015 has become more problematic.

I'll have more up at later, and I'll update with a link here.