June 2014 Macro Pulse – Anomaly Economy

The revision of 1Q2014 U.S. real GDP growth to a seasonally adjusted and annualized rate (SAAR) of -1.0 percent (the first contraction in three years) erupted in round of blame fixing. At present, the most popular scapegoat is harsh winter weather. 

Those subscribing to that hypothesis expect a strong 2Q rebound with spring’s arrival. “The good news is that 1Q is over,” said Ryan Sweet, senior economist at Moody’s Analytics. “I wouldn’t worry too much about the decline; it’s mostly driven by less construction spending and less inventory accumulation. [The second] quarter should be a good one.” Bloomberg’s May 29 median forecast called for a 3.5 percent gain, with Morgan Stanley’s 4.2 percent toward the upper end of the spectrum. Although the International Monetary Fund cut its 2014 U.S. growth estimate to 2 percent, from 2.8 percent in April, even that reduced expectation would require growth rates of 3+ percent during subsequent quarters.

But what if 2Q GDP growth fails to bounce back? Certainly weather depressed 1Q economic activity; yet, it seems the weather narrative masks fundamental issues in the U.S. economy. We note there is a growing list of potential “anomalies” should 2Q GDP not meet expectations….

Click here to read the rest of the June 2014 Macro Pulse recap.

The Macro Pulse blog is a commentary about recent economic developments affecting the forest products industry. The monthly Macro Pulse newsletter summarizes the previous 30 days of commentary available on this website.