The nation's economy, which had firmed up nicely during last year's concluding half on better consumer activity and some inventory building, came under material pressure during the opening three months of this year, held in check primarily by a run of harsh winter weather that not only interrupted business and some consumers, but also added measurably to the cost of living and conducting business.
Specifically, after the nation's gross domestic product had risen by 4.1% and 2.6%, respectively, in the third and fourth quarters of 2013 GDP growth slowed to a virtual crawl in this year's opening period, gaining a scant 0.1%, the smallest increase since the fourth quarter of 2012. That nominal gain was also well below the underwhelming forecast of 1.2%.
Behind this notable slowdown were sharp reversals in business investment (off 2.1%) and home investment (down a steep 5.7%), with the latter not being very surprising given the long stretches of inclement weather. Other weak links included slower rates of inventory building, state and local government spending, and nonresidential fixed investment. Encouragingly, consumer spending still ticked up 3.3% in the quarter, which was just a tad weaker than the 3.3% increase tallied during last year's closing three months.
Meanwhile, business investment eased by 2.1%, while exports reversed badly going from the fourth quarter's gain of 9.5% to a decline of 7.6% to start the new year. Taken as a whole, this was a sadly disquieting report, although the solid gain in consumer spending helped to counter the overall weakness to a degree. As to inventories, the change in real private inventory investment subtracted almost 0.6% from opening-period GDP.
It should be noted, meantime, that this is the so-called advance estimate for GDP, and will be followed about a month later (on May 29th) with the more in-depth preliminary estimate, which is based on more complete source data.
In sum, this was a disturbing report, but the seeming impact of the weather makes this more of a one-time event than not. Our sense is that all eyes will be focused on the second-quarter GDP reading, which is due out in late July to ascertain whether the blame, now being largely put on the weather for the weak start to this year, is fully accurate.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.