Bleak but expected news on the U.S. economy’s first quarter performance. The Wall Street Journal reports:
The U.S. economy slowed to a crawl at the start of the year as businesses slashed investment, exports tumbled and consumers showed signs of caution, marking a return to the uneven growth that has been a hallmark of the nearly six-year economic expansion.
Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 0.2% seasonally adjusted annual rate in the first quarter, the Commerce Department said Wednesday. The economy advanced at a 2.2% pace in the fourth quarter and 5% in the third.
Economists and business analysts suggest the downturn may be transitory, influenced by harsh winter weather in the Northeast, declining energy prices, the West Coast port slowdown and other factors. The Washington Post cites economists who believe the recovery may be quick.
Many analysts say the United States is likely to snap back into gear for the rest of the year, following the pattern of 2014, when growth was slow in the winter and then picked up. They note that the labor market is still strong, consumer confidence is high, and warming weather should lead to an uptick in spending.
The WaPo also acknowledges that those analysts may be mistaken. The WSJ summarizes a less optimistic prognosis.
But not all the factors behind the slowdown appear temporary. A stronger dollar and cheaper oil could persist, keeping exports and energy-sector investment at bay.
As well, rising inventories kept the U.S. economy out of recession, contributing 0.74 percentage point to GDP in the first quarter. A second-quarter repeat is unlikely.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said producers probably will allow inventory positions to run off rather than building them up even more. “This tells us that current-quarter growth is likely to run around 2.5%, not the 4% snapback we had previously been anticipating,” he said.
Adding to concerns is yesterday’s report on consumer confidence from the Conference Board.
“Consumer confidence, which had rebounded in March, gave back all of the gain and more in April,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “This month’s retreat was prompted by a softening in current conditions, likely sparked by the recent lackluster performance of the labor market, and apprehension about the short-term outlook. The Present Situation Index declined for the third consecutive month. Coupled with waning expectations, there is little to suggest that economic momentum will pick up in the months ahead.”
The state Economic and Revenue Forecast Council foreshadowed the slowdown in its April economic and revenue update. The report noted declining U.S. manufacturing performance and subpar employment gains nationally and in Washington.
Shopfloor, the blog of the National Association of Manufacturers, noted one significant policy implication that matters to producers in this trade-dependent state.
The timing couldn’t be more ripe for a trade conversation in Washington. It matters to our economy. It is the reason why we need to enact Trade Promotion Authority, reauthorize the Export-Import Bank, pass the Miscellaneous Tariff Bill and seek other measures that reduce barriers and open new markets for our products.
The policy focus is important, both nationally (e.g., Ex-Im) and in our state. While the state economy, largely fueled by the Puget Sound metro area, remains relatively strong, continued declines in the national economy can exert a drag that affects all states.
Opportunity Washington continues to promote policies that will boost economic opportunity throughout the state: a comprehensive transportation package, investments in education to close the skills gap, and prudent, sustainable budgeting. The Legislature can act to assure that the state and its residents are positioned to withstand economic headwinds from the national economy and to capitalize on the opportunities made possible by expanded economic vitality. We support those efforts.