Don’t Be Misled By Weak GDP Numbers
Headlines this morning had a decidedly downbeat tone about the economy, as the Commerce Department revised downward the already lackluster first-quarter gross domestic product numbers.
But our senior research fellow, Bob Hughes, said a closer reading of this morning’s data shows the economy really isn’t too bad.
GDP for the first three months of the year had originally been reported as 0.2 percent growth, and this morning, that was revised downward to -0.7 percent.
But Hughes noted that private final sales actually rose during the first quarter by a modest but solid 1.2 percent. From one year ago, private final sales were up 3.4 percent, he said.
Private final sales reflect sales to domestic buyers other than the government, which he said is a better barometer of U.S. private demand than headline GDP. Exports and inventory swings, which contributed heavily to the downward revision of overall GDP, are excluded from this metric.
“It’s really not too bad. Organic growth in the U.S. economy is holding up nicely,” Hughes said.
Amid a week that also saw a solid report on initial claims for unemployment, as well as business investment, Hughes was cautiously upbeat.
“We’re not booming, but we’re growing at a decent pace,” Hughes said.
