You will hear the words “cold weather” more than you should during the month of May — and they won’t be talking about the temperature outside.
That’s because “cold weather” is the all-purpose excuse for any economist whose forecast has been a little or, more likely, a lot askew this year. It’s even handy for corporate execs who can’t make their shareholders understand why the long-awaited economic turnaround is still just around the corner.
“Damn, cold! Miserable snow! Without it we’d be doing great,” is the refrain you’ll hear from everyone who doesn’t understand a key point: the US economy isn’t just doing poorly, it is broken.
Neither rain, nor snow, nor gloom of night is to blame. (Sort of like the US Postal Service.)
Why will the chorus be singing on Thursday? Because at 8:30 a.m. the Commerce Department is announcing the latest estimate of gross domestic product for the first three months of 2014.
And it won’t be pretty.
The first stab at first-quarter growth showed hardly any. The GDP, which measures economic expansion, grew at an annualized rate of 0.1 percent in the first quarter, according to Commerce Department’s first guesstimate in April.
Again, let me put that into perspective. “Annualized rate” means that the economy would have to continue to grow at the same pace for the other three quarters in order to achieve that exalted 0.1 percent rate.
That also means the economy expanded by a measly 0.025 percent in the first quarter. Let me state the obvious: That’s such low growth that if someone’s fingers twitched while typing in the figures, the first quarter’s positive GDP would have disappeared.
And that was the good news.
The consensus among the experts who think they know these things is that GDP really contracted during the first quarter. That’s what they think the government will announce Thursday.
The consensus, in fact, is that Commerce Department will announce a GDP contraction of about 0.5 percent annualized.
But don’t worry — it was the snow and the cold and, you know, things that only God can control.
The second quarter, which we’re in right now, will be much better, the Pollyanna choir has been singing for months. In fact, Wall Street seems to think the quarter that ends next month will have annualized growth of 3.8 percent.
The situation will get even more confusing next week when the Labor Department releases its job-growth statistics for May.
If I’m right, that figure will look stronger than Wall Street is expecting because of the Labor Department’s Performance Enhancing Estimates.
(I’ll give you more about the Labor Department’s P.E.E. next week.)
Let’s take five seconds to allow the optimists their moment of delusion.
What could possibly go wrong in the second quarter? I mean, after six years, maybe this is the turnaround we’ve all been hoping for, praying for, imagining and dreaming of.
Maybe this time it is real. (I’m rooting for ya’, economy!)
But there are some things you ought to know.
First, even if we achieve 3.8 percent annualized growth, that’s not really so good. It’s still a percentage point or so below normal growth. And it is particularly poor since the Federal Reserve and Congress have been breaking the bank trying to achieve any kind of growth.
Second: You have to keep an eye on what the Commerce Department calls its “deflator” for trickery. The deflator pegged inflation at just 1.3 percent in the first quarter, which is below the Commerce Department’s other price indicators.
If Commerce wants to artificially enhance GDP growth, all it has to do is lower the deflator. A drop in the deflator to just 1 percent, for instance, would add 0.3 percent to GDP growth.
Third: Maybe the first quarter wasn’t all about the weather. Perhaps the weather caused more spending in the US rather than less.
After all, didn’t many municipalities break their budgets removing snow, buying salt and paying overtime? And didn’t consumers have to spend extra to heat their houses?
Maybe the first quarter’s economy was just lousy and Mother Nature wasn’t to blame. And maybe some of that weakness will carry over to the second quarter.
Finally, as I’ve also been telling you (and will get into more next week), those jazzed-up job figures we had in April and could have in May will end. And we should have another summer of disappointing job growth.
There’s a whole lot more to discuss but — to be honest with you — I have an appointment to get a haircut and have to cut this short.
But here’s an example of how deceptive economic statistics can be. On Tuesday Washington announced that durable goods orders in April rose 0.8 percent, compared with an expected 0.7 percent decline.
Why the better figures?
Mostly because the Navy signed a $17.6 billion contract for 10 nuclear-powered submarines.