US GDP contracts 1% in Q1

[Nhoj]

The idea that the winter caused all that alone is patently absurd,  just as saying it had no effect is.

[King]

There doesn't seem to be any hubbub by economists or investors on whether the weather is a valid excuse or not. They all seem to accept it. Only political ideologues are nervous that it's not the case.

This was an extreme weather winter, not only in the coldness in the Northeast that happens every year. It was frozen in the South and the West had record high temps and drought. It's caused chaos with supermarket prices that continues today.

-1% is pretty bad, but in a world that loves to panic, the lack of panic should speak volumes.

[Hamster]

That winter wasn't the worst one to ever affect America by any means, but it would be rash to say that it didn't affect the contraction at all.

On the other hand, if the second quarter growth is less than 1 percent or if there is another contraction,  it could be possible that the nation is getting ready to double-dip into a recession. That seems unlikely, but it could very well happen.

This contraction shouldn't be downplayed, but at the same rate, we shouldn't hype this up. It's just one quarter.

There is a reason that no-one is remotely panicking or worried about the Q's GDP figures. "Downplaying" it is the appropriate reaction.

No, treading carefully is a better reaction. It would be best to watch the second quarter's results.

If we think back to the most recent financial crisis, indicators of a recession started showing up in 2007, but those who weren't alarmists waited until the later months of 2008 to declare that we were in a downturn.

Those indicators existed because the housing bubble was collapsing and the construction industry was bleeding jobs. No one predicted that a recession was imminent because it wasn't immediately obvious that the entire banking system was going to be sunk by homes losing their value.

muh quarters!

Only fools didn't realize a recession was going to occur.

lol

[Person Man]

I remember as recently as last year that the roads into Wyoming and through Wyoming were closed. People were stranded in their towns for a couple of days. It also didn't help that there were a couple a days of -30something weather, -50something if you counted wind chill. It was like friggin' Mars.  There is no economic activity if you are stranded.

[Never]

I remember as recently as last year that the roads into Wyoming and through Wyoming were closed. People were stranded in their towns for a couple of days. It also didn't help that there were a couple a days of -30something weather, -50something if you counted wind chill. It was like friggin' Mars.  There is no economic activity if you are stranded.

I see what you're saying, this winter had extremely cold weather, but can't it snow like every month out of the year in Wyoming?

[Person Man]

I remember as recently as last year that the roads into Wyoming and through Wyoming were closed. People were stranded in their towns for a couple of days. It also didn't help that there were a couple a days of -30something weather, -50something if you counted wind chill. It was like friggin' Mars.  There is no economic activity if you are stranded.

I see what you're saying, this winter had extremely cold weather, but can't it snow like every month out of the year in Wyoming?

Yes. But usually you only get like 3 feet a snow a year on the front range and high desert. In upstate New York, 10 feet is not uncommon. This year, there was six inches of snow as far south as Loveland on May 15.

[muon2]

That winter wasn't the worst one to ever affect America by any means, but it would be rash to say that it didn't affect the contraction at all.

On the other hand, if the second quarter growth is less than 1 percent or if there is another contraction,  it could be possible that the nation is getting ready to double-dip into a recession. That seems unlikely, but it could very well happen.

This contraction shouldn't be downplayed, but at the same rate, we shouldn't hype this up. It's just one quarter.

Even if a contraction is emerging it won't be a double dip. That requires a short expansion of less than two years like in the early 1980's. At this point the recovery is five years old and is already at the average post-war recovery period. If a contraction occurs it will just be a normal cycle recession.

[Simfan34]

I'm not disputing facts, but I'll admit it feels strange that in the year 2014 economic growth can be markedly affected by snowfall.

Ummmm... Why?

Because technology, or something like that.

[AggregateDemand]

There doesn't seem to be any hubbub by economists or investors on whether the weather is a valid excuse or not. They all seem to accept it. Only political ideologues are nervous that it's not the case.

This was an extreme weather winter, not only in the coldness in the Northeast that happens every year. It was frozen in the South and the West had record high temps and drought. It's caused chaos with supermarket prices that continues today.

-1% is pretty bad, but in a world that loves to panic, the lack of panic should speak volumes.

Structural economists and investors would have a good chortle at the snowstorm theory. We'll see what happens, but most delayed purchasing activities would have been recaptured during the first quarter, except big ticket items that tend to sell slowly in Q1 (cars, boats, etc).

$40B worth of delayed purchases and lost goods? unlikely

[Cincinnatus]

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Interesting, a Fed report you say?

[Oakvale]

sure trust the 'Fed' sheeple

[Cincinnatus]

sure trust the 'Fed' sheeple

Fair point.  Who are they to refute the opinion of armchair economists on The Atlas.

[MurrayBannerman]

I'm not disputing facts, but I'll admit it feels strange that in the year 2014 economic growth can be markedly affected by snowfall.

BREAKING: Large amount of frozen water on the ground makes transportation difficult.

BREAKING: Person from PA doesn't know that this happens every year.

[AggregateDemand]

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Interesting, a Fed report you say?

If you skip a few meals, you've restricted calories and lost weight, but it's not the cause of 20lb weight loss during Q1. We're interested in causation, and we won't have conclusive evidence until after Q2 data has been compiled. Furthermore, the Fed has an interest in blaming everything but tapering for economic slowdown.

Consumption always rises during Q2 as the post-Christmas lull comes to an end, and tax refunds are spent. Unless we see Q2 growth in excess of 3-4% annualized and abnormally strong consumption spending in the Northeast and Northern Midwest, we can put the snow storm theory to bed.

[Meursault]

Are you still raping that caloric intake metaphor to death, you windowlicker?

[King]

I'm not disputing facts, but I'll admit it feels strange that in the year 2014 economic growth can be markedly affected by snowfall.

BREAKING: Large amount of frozen water on the ground makes transportation difficult.

BREAKING: Person from PA doesn't know that this happens every year.

Not in Georgia and Florida.

[Tender Branson]

Oh man, how I hate this "annualized" calculation method ...

The US GDP is down by 2.9% in "annualized" terms, but in fact UP by 1.5% relative to the first quarter of 2013.

[Never]

538 seems to believe that the 2.9% decline in Q1 could be indicative of a recession. It was pointed out in the attached article that "negative quarters are rare outside of recessions", but that there have been many cases in the past when negative quarters were apparent flukes, since they were followed by very positive economic news the next quarter. Still, the author found it worth noting that the last two times America had quarters this negative, recessions followed.

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Personally, I think the jury is still out on this one; the GDP news for Q2 will probably clear things up.

[🐒Gods of Prosperity🔱🐲💸]

Some people are claiming that this is due largely to decreased health spending with Obamacare. How is that supposed to work?

[AggregateDemand]

Some people are claiming that this is due largely to decreased health spending with Obamacare. How is that supposed to work?

Consumers/Corporations spend less and they temporarily hoard cash. Since we are awash in liquidity, investment allocated by the market doesn't lead to significant growth. Eventually, companies realize cost of labor is lower and they contemplate hiring. Consumers contemplate spending some of their savings.

However, ACA doesn't have the structural incentives to decrease spending. IIRC, BEA forecast 9.9% increase in healthcare spending for Q1. Falling healthcare expenditures are probably attributable to the new culture of panic surrounding healthcare. People believe they can't afford to seek care, and, since the economy is still weak, they are willing to accept that their employers cannot afford premiums for lavish care, either. Hopefully, this trend will last at least one generation.

I suppose the people who signed up for ACA on the exchanges could be far more healthy than predicted, but I tend to think tapering is behind slow Q1 growth.