So the US economy went and did a very bad thing. Instead of growing during the first three months of this year — government’s first estimate was a 0.2% increase — it shrank. Now positive is sure better than negative, especially when many speculated/hoped/prayed/wished 2015 would see a marked acceleration in growth. But there’s a caveat in play here. A couple, actually.
First, something odd has been happening with first-quarter GDP reports for awhile. JPMorgan notes that over the past 20 years, 1Q GDP growth has averaged 1.6 percentage points lower than in other quarters. Seasonal adjustments are supposed to smooth that out. Thus the San Francisco Fed finds the “anomalous pattern of generally weak first-quarter growth suggests that the BEA’s estimate of GDP growth for the first three months of 2015 may understate the true strength of the economy.” Although the Fed in Washington disagrees, the SF Fed thinks real GDP in 1Q was closer to 2%. Indeed, real gross domestic income was much stronger in this revised report, up 1.4%. Capital Economics says it “would view that as a much more accurate gauge of the economy’s true performance over the three months of this year.”
Second, there’s a plausible case that mismeasurement of productivity is also chronically understating US economic growth. Goldman Sachs, in a recent note:
Measured productivity growth has slowed sharply in recent years, and we have reduced our working assumption for the underlying trend to 1½%. … The proximate cause of the slowdown is a slump in the measured contribution from information technology. But is the weakness for real? We have our doubts. Profit margins have risen to record levels, inflation has mostly surprised on the downside, overall equity prices have surged, and technology stocks have performed even better than the broader market. None of this feels like a major IT-led productivity slowdown. One potential explanation that reconciles these observations is that structural changes in the US economy may have resulted in a statistical understatement of real GDP growth. There are several possible areas of concern, but the rapid growth of software and digital content—where quality-adjusted prices and real output are much harder to measure than in most other sectors—seems particularly important.
Along the same lines, here is economist Martin Feldstein in a recent column:
Today’s pessimists about the economy’s rate of growth are wrong because the official statistics understate the growth of real GDP, of productivity, and of real household incomes. … The measurement problem is particularly severe for new products. … The result is that the rise in real incomes is underestimated, and the common concern about what appears to be the slow growth of average household incomes is therefore misplaced. Official statistics portray a 10% decline in the real median household income since 2000, fueling economic pessimism. But these low growth estimates fail to reflect the remarkable innovations in everything from health care to Internet services to video entertainment that have made life better during these years, as well as the more modest year-to-year improvements in the quality of products and services.
For now Goldman says “it is better to focus on other indicators—especially employment—to gauge the cumulative progress of the recovery and the remaining amount of slack.” And this from Barlcays: “We believe growth in Q1 has systematically underperformed due to an incomplete seasonal adjustment process that leaves residual seasonality in many investment categories. As a result, we look to other indicators such as payroll growth, the unemployment rate, and the ISMs to get a complementary reading on near-term momentum.”
By the way, through April total job growth is down 15% from the first four months of 2014. There’s a new job report next week plus revisions to previous months. But overall it does look like a same-old, same-old year. Certainly a weak start. JPMorgan:
Even though 1Q may eventually get revised higher, it was clearly a weak quarter for growth. The modest upside surprise in the today’s headline figure was mainly related to inventories, and this is an unfavorable development for 2Q growth. Overall, it looks like growth in the first half of this year will be pretty weak partially because of a combination of some unusual special factors (bad weather, port strikes, issues with seasonal adjustment) as well as more fundamental drags coming from the stronger dollar and the drop in oil prices. … Real gross domestic income increased 1.4% saar in 1Q, not as bad as the GDP figure for the quarter, but still a pretty soft gain.
from AEI » Latest Content http://ift.tt/1cnhCzE
0 التعليقات:
Post a Comment