Going into this morning, the most recent data showed the economy actually shrunk a little in the first quarter, covering January through March, which only helped make this morning’s GDP report that much more important.
Most economists expected the gross domestic product to grow in the second quarter, covering April through June, at around a 2.5% rate, and that’s roughly in line with what happened.
The U.S. economy picked up modestly in the spring after a lackluster start to the year, expanding at an annual 2.3% rate in the second quarter. Growth was led by consumer spending on big-ticket items such as new cars as well as home construction, the government said Thursday. […]Consumer spending, the main engine of U.S. growth, rose 2.9%.
This is, of course, a preliminary estimate that will be revised twice more in the coming months. Also note, though previous reporting showed the economy contracting slightly in the first quarter, this morning’s report said the economy actually grew a little – the final tally showed 0.6% growth, instead of 0.2% contraction.
So, what’s the broader takeaway? I’m reminded of something Neil Irwin wrote in April about why economic observers care more about the second quarter’s GDP than the first.
The weak economic readings to start both this year and last reflect two consecutive years of unusually bad winter weather in heavily populated parts of the country, combined with evidence that the formulas used to adjust for the normal seasonal variations may be creating a distorted picture regarding the January-through-March quarter.The real test for the economy is whether the first quarter will, as was the case last year, turn out to be an aberration, with a catch-up effect happening in the form of apparently strong growth in the spring and summer months.
With this in mind, it’s increasingly easy to shrug off the poor first quarter, and instead see an economy that’s slowly chugging along.
As for the image above, the chart shows GDP numbers by quarter since the Great Recession began. The red columns show the economy under the Bush administration; the blue columns show the economy under the Obama administration.